Oil prices reached their highest level in over a year due to a significant decrease in crude stocks at a key storage hub. Crude inventories in Cushing, Oklahoma fell to 22 million barrels, the lowest level since July of the previous year. This drop of 943,000 barrels compared to the previous week prompted the surge in oil prices. The U.S. West Texas Intermediate futures touched $95.03 per barrel, the highest since August of the current year. If inventories continue to decline, it may become more challenging to supply the market with crude oil.
Bart Melek, the managing director of TD Securities, believes that oil prices will remain at elevated levels throughout the year, especially if OPEC+ continues to restrict supplies. However, it is important to note that refinery throughputs are expected to decline in the coming months due to maintenance season, which may limit the rally in oil prices. Melek suggests that the recent surge in prices may not be permanent and that the rally may have reached its end.
There are concerns among OPEC member countries about long-term demand destruction if oil prices reach triple digits. It is speculated that OPEC may signal the end of its strong measures to limit supply as the year comes to a close. Despite this, forecasts for $100 per barrel oil have been circulating, with Goldman Sachs raising its 12-month Brent forecast to $100 on the basis of inventory draws and strong demand growth in the Asia region. The bank believes that OPEC will be able to sustain Brent within the $80 to $105 range in 2024.