Oil Drops The Most In Two Weeks As Concerns Over Energy Crunch Ease

Nonetheless, talk is still rife that prices could soon reach $100: File Image/Pixabay

Worry over the impending global energy crunch, which had replaced the long-standing worry over Covid as the primary influence of crude trading of late, seemed to ease somewhat on Wednesday and to the detriment of oil prices, which declined by the most in two weeks.

West Texas Intermediate fell $1.50 to settle at $77.43 per barrel, while Brent dropped $1.48 to end the session at $81.08 per barrel.

The declines occurred after media reported that the U.S. was raising the prospect of releasing emergency oil reserves as a signal that country will not let prices get out of hand, and also after The American Petroleum Institute reported that U.S. oil inventories actually rose by 951,000 barrels in the week to October 1.

According to the API, gasoline inventories also rose by 3.682 million barrels in the week while stockpiles of distillate fuel, including diesel fuel and heating oil, climbed 345,000 barrels.

Additionally, Russian President Vladimir Putin indicated on Wednesday that his country will ramp up gas exports to stabilize energy markets (some European officials cite lower output from the former Soviet Union as a major cause of the energy crunch in that part of the world).

But concern over the crunch is hardly over, and as in the previous session many analysts were still mulling over the Organization of the Petroleum Exporting Countries' (OPEC) decision on Monday to maintain its planned output increase rather than boosting it.

ANZ said in a note, “The [OPEC+] increase was well below what the market was expecting, considering the energy crunch across the globe; not surprisingly, there is speculation that OPEC will be forced to move before the next scheduled meeting if demand continues to surge.”

For the record, OPEC staying on course rather than turning on the taps was said to be the result of  the cartel's fear that the fourth wave of Covid could impact demand recovery (even though global numbers show the virus to be in retreat).

Meanwhile, John Driscoll, chief strategist at JTD Energy Services, became the latest analyst to predict that oil could soon reach $100 per barrel: on Wednesday he told media that OPEC's move was "a very prudent course of action" but then added, “What I think [is] more concerning to everyone out there … what happens during the winter? Are we going to have another Arctic freeze?

"I think, given all the uncertainty over weather and climate change, we could be in for a wild ride here.”