Oil Soars As Worries Of Tight Crude Supplies Go Into Overdrive

But Kissler remains unimpressed with Wednesday's trading activity: File Image/Pixabay

Growing appreciation for tightening crude inventories around the world erupted into unfettered worry on Wednesday, with nervous traders reacting to a steep drop in U.S. stocks by causing a 3 percent rise in oil prices.

Brent settled up $2.59, or 2.8 percent, at $96.55 per barrel, while West Texas Intermediate settled up $3.29, or 3.6 percent, to $93.68, after government data showed that U.S. crude stocks fell by 2.2 million barrels last week to 416.3 million barrels. 

The Energy Information Administration also reported that crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell by 943,000 barrels in the week to just under 22 million barrels, their lowest since July 2022.

Phil Flynn, senior market analyst at Price Futures Group Inc., remarked, “All eyes are on Cushing, Oklahoma, as supplies continue to drain from that area; there are concerns about a squeeze at the delivery time if Cushing continues to fall."

Adding to supply concerns was Russia, whose government cited proposals to restrict exports of oil products purchased for domestic use following president Vladimir Putin ordering that retail fuel prices stabilise after a jump caused by export increases.

However, the jump in energy prices have encouraged some firms to intensify their activities: the Federal Reserve Bank of Dallas released a survey showing oil and gas activity in three key energy producing U.S. states has been rising concurrent to the price hikes.

Similarly, soaring oil prices prompted France’s TotalEnergies to announce plans to boost production and shareholder distributions.

The company’s new strategy will be to increase oil production by 2 percent and natural gas production by 3 percent per year, over the next five years; its oil and gas business is expected to generate more than $3 billion of additional underlying cash flow in 2028, compared to 2023.

Also, it’s highly questionable whether this most recent surge in oil prices will be long-lasting: Dennis Kissler, senior vice president of trading at BOK Financial, said, "The market is overbought and a correction is definitely needed."