Oil price surge driven by fears of supply disruptions

3 Apr 2024 , 11:26 AM

Wednesday saw oil prices continue their upward trend as market concerns about limited supply were heightened by a greater than anticipated decline in U.S. crude inventories and growing geopolitical tensions.

U.S. West Texas Intermediate (WTI) crude futures for May increased by 17 cents, or around 0.2%, to $85.32 a barrel, while Brent futures for June delivery increased by 20 cents, or 0.22%, to $89.12 per barrel.

The day before, both Brent and WTI reached their highest levels since October.

More than the 1.5 million barrel decline predicted by analysts in a Reuters poll, U.S. crude oil stockpiles decreased by 2.3 million barrels last week. Later on Wednesday, US government data is anticipated.

In terms of geopolitics, one of Russia’s largest refineries was attacked by a Ukrainian drone, which Russia first claimed to have repulsed.

Russia, one of the top three producers of oil in the world and a major supplier of oil products, has been battling Ukrainian attacks on its oil refineries and energy infrastructure.

In other news, Iran increased the likelihood of a further escalation in the Middle East war by threatening to exact retribution on Israel for an airstrike that killed five military advisers and two of its generals in its embassy compound in Damascus.

As it prepares to process domestic oil at the new Dos Bocas refinery, Mexico’s state energy giant Pemex requested in an internal memo obtained by Reuters that its trading section cancel up to 436,000 barrels per day of crude exports this month, further limiting supply.

At a meeting on Wednesday, an OPEC+ ministerial panel is not expected to suggest any modifications to the organization’s oil output policy, five OPEC+ sources told Reuters.

On Wednesday, the value of the US dollar declined relative to a group of other currencies, which bolstered demand for goods denominated in dollars, such as oil.

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