Oil prices increase in early trade as markets focus on a supply shortage

14 Sep 2023 , 10:25 AM

Following a brief decline the previous day, oil prices increased on Thursday as investors’ attention returned to the prospect of a limited supply of crude for the remainder of 2023.

The price of benchmark Brent crude increased 17 cents to $92.05 per barrel, while West Texas Intermediate crude (WTI) increased 19 cents to $88.71.

The International Energy Agency (IEA) warned on Wednesday that the extension of Saudi Arabia and Russia’s oil production cutbacks to the end of 2023 will result in a significant market deficit through the fourth quarter, mostly sticking to its projections for demand growth this year and next.

On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) maintained its predictions for a significant increase in the world’s oil consumption in 2023 and 2024.

Prior to news showing an unexpected increase in U.S. crude and fuel inventories that alarmed markets about demand, both benchmarks on Wednesday reached 10-month highs.

Despite analysts’ predictions of a 1.9 million-barrel reduction in a Reuters poll, U.S. oil inventories increased by 4 million barrels last week. As refiners increased their activity, fuel stocks also increased more than was anticipated.

Investors viewed the most recent estimate of U.S. inflation as evidence that the Federal Reserve will not raise interest rates next week and may even prolong its current pause, which boosted expectations for robust oil demand.

Higher interest rates make borrowing more expensive for households and businesses, which might impede economic growth and lower demand for oil.

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