Oil prices traded steadily at five-month highs on Wednesday, with the markets being driven by a tighter scenario for global supplies due to a possible decline in US inventories and further signs of disruptions in Russia.
Brent crude oil futures for June delivery gained 0.07% to $88.98 per barrel, while the US West Texas Intermediate (WTI) crude futures expiring in the same month added 0.05% to $84.26 per barrel.
While a tighter outlook for crude markets worldwide has enabled prices to outperform a rising dollar and the uncertain direction of US interest rates, they have also kept oil from broader increases.
Oil prices climbed earlier this week after Mexican state-owned gas company Petroleos Mexicanos (Pemex) reportedly plans to trim some crude exports over the next few months.
Traders are awaiting the meeting of the Organization of Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, later in the day. The group is widely seen maintaining the current output policy.
The markets are also expected to observe increased supply disruptions in the Middle East, which may propel crude prices to levels last reached in late October 2023.
Conflict in the region continues to intensify after Iran on Tuesday promised retaliation on Israel over an alleged Israeli air strike on an embassy compound in Syria the day prior.
The attack has resulted in the deaths of seven officials, including Iran’s Islamic Revolutionary Guards Corps (IRGC) commander Mohammad Reza Zahedi.
Fewer US Stocks, More Russia Disruptions Keep Outlook Tight
Signs of dwindling US inventories grew on Tuesday after data from the American Petroleum Institute (API) showed that the country’s crude stockpiles fell 2.3 million barrels in the week ending March 28, ending above forecasts of a 2 million barrel slide.
The latest draw was the third weekly drop in inventories in the last four weeks despite the reading following a 9.3 million barrel surge in US crude stocks posted in the previous week.
The declines bolstered the potential of tighter oil markets in the top consumer, especially as a ramp-up in exports plugged a supply hole from OPEC and Russia. The US is also expected to see improved demand during the spring and summer seasons.
The API data indicates a similar trend in the Energy Information Administration’s (EIA) inventory data, which is set to be released later Wednesday.
Adding to bets on tighter supplies worldwide were more possible disruptions in Russian oil after Ukraine conducted a drone attack on the country’s third-largest oil refinery on Tuesday, although there was reportedly no serious damage done.
Still, the attack followed a series of similar strikes on Russia’s energy infrastructure, which may further curb the country’s exports.
The affected unit processes around 155,000 barrels per day (bpd).
