Oil prices rose more than $1 on Wednesday, extending overnight gains. Industry data indicated that crude stocks in the United States declined more than expected last week after two storms. It showing constrained supply as demand improves.
Prices were also sustained as several OPEC members struggled to increase supply, as well as a broader perception of energy market shortages during Europe’s power and gas crisis.
West Texas Intermediate (WTI) oil futures in the United States increased $1.16, or 1.6 percent, to $71.65 per barrel by 1055 GMT, adding to a 35-cent rise on Tuesday. Brent crude futures rose $1.08, or 1.4 percent, to $75.44 a barrel, after rising 44 cents the day before.
Following Monday’s pressure from broad market fears over the likely default of Chinese property developer China Evergrande Group, the oil market’s focus shifted to concerns over limited supplies. The API weekly report showed a larger-than-expected reduction in US crude oil stocks. According to Ravindra Rao, vice president of commodities at Kotak Securities, it supports crude.
Prices are still rangebound ahead of the EIA weekly report due later today. And, the Federal Reserve’s monetary policy decision in the United States. In the short term, crude may move in tandem with broader markets, focusing on China and the Fed. According to market sources, oil stockpiles in the United States declined by 6.1 million barrels in the week ending September 17. They cited numbers released by the American Petroleum Institute on Tuesday.
That was a significantly more significant drop than projected. The market will be looking for confirmation of the dips in US official data on Wednesday. Given the many supportive variables in the energy market, most notably sky-high natural gas prices, current price drops should be temporary.
Soaring Gas Prices
Global record-high natural gas prices are causing some energy-intensive industries to reduce production. Adding disruptions in global supply chains in some sectors such as food potentially results in higher costs being passed on to their customers.
As a result of rising energy prices, some companies, including steel producers, fertilizer manufacturers, and glass manufacturers, have had to cease or restrict output across Europe and Asia. It includes two of the world’s largest fertilizer producers, who announced plans to reduce production in Europe. Gas prices in Europe have increased by more than 250 percent this year. In comparison, prices in Asia have increased by roughly 175 percent since late January. Electricity rates have also increased considerably because many power facilities are gas-fired.
The Industrial Energy Consumers of America, a trade group representing chemical, food, and materials industries, has recently urged the US Department of Energy to prohibit the country’s liquefied natural gas producers from exporting gas.
Additional gas supplies could help relieve pressure. Norway has granted permission for other gas exports. More supplies from Russia could arrive by the end of the year. The country’s new Nord Stream 2 pipeline awaits Germany’s energy regulator clearance. The US chastised the pipeline project, which claims it will strengthen Europe’s reliance on the Russian oil supply.