NEW YORK: Oil prices experienced an upward surge on Wednesday following reports of tightening US inventories and fuel supplies, coupled with a warning from the Saudi energy minister that sent a signal to speculators about potential further output cuts by OPEC+.
Brent crude futures saw an increase of 1.2 percent, rising by 88 cents to reach $77.72 a barrel at 08:37 GMT. Meanwhile, US West Texas Intermediate crude (WTI) gained 1.3 percent, or 98 cents, to settle at $73.89 per barrel.
Saudi Arabia’s energy minister issued a cautionary statement directed at short sellers, indicating that they should be prepared for potential repercussions. Market participants interpreted this as a hint that OPEC+ might consider implementing additional output cuts during their upcoming meeting scheduled for June 4.
“Oil prices are trading higher… buoyed by the latest short-seller warning from Saudi Arabia,” noted OANDA market analyst Craig Erlam. However, he cautioned that traders might be tempted to challenge the minister’s statement based on previous experiences.
Reasons For Increase in Oil Prices
Further contributing to the increase in oil prices was industry data revealing a substantial decline in US crude oil and fuel inventories.
According to sources citing figures from the American Petroleum Institute (API), crude inventories fell by approximately 6.8 million barrels last week, while gasoline inventories experienced a decline of about 6.4 million barrels.
Should data from the Energy Information Administration (EIA), set to be released on Wednesday, confirm these figures, it would mark the third consecutive week of declining US gasoline inventories, reaching their lowest levels prior to Memorial Day since 2014.
The Memorial Day holiday in the United States, falling on May 29 this year, traditionally signifies the beginning of peak summer travel and heightened fuel demand.
In other news, the lack of progress during the recent debt ceiling talks weighed on broader markets. With the deadline to raise the government’s borrowing limit approaching and the risk of default increasing, the talks concluded without any signs of resolution.
