ANALYSIS - Decline in US crude inventories push oil prices to 1-year high

By Ovunc Kutlu

ISTANBUL (AA) - A decline in US crude oil stocks below a critical threshold this week has caused oil prices to climb above $95 a barrel, as they have been on the rise in recent weeks because of supply cuts and growing global demand.

Crude inventories in the American storage hub in Cushing, Oklahoma, fell to 21.96 million barrels for the week ending Sept. 22, according to data released by the US Energy Information Administration (EIA).

It is a significant weekly decline of 943,000 barrels compared to the previous week and marked the first time crude stocks in Cushing fell below 22 million since July 2022, data showed.

Crude stocks in Oklahoma do not include the Strategic Petroleum Reserve (SPR), which is saved for national emergencies, global supply shortages and national disasters.

SPR levels plummeted to 346.7 million in July, their lowest since August 1983, according to EIA data.

President Joe Biden, in late 2021, ordered the release of SPR to provide additional supplies to the market and to lower crude prices.

US Energy Department's Office of Petroleum Reserves announced in July that it is planning to purchase around 6 million barrels for the SPR, scheduled for October and November.

The purchase is in continuation of the Biden administration's SPR replenishment plan, while it is the third solicitation that the Energy Department has issued this year to repurchase oil for the SPR, it said.

- Supply cuts by OPEC

Oil prices, however, are on the rise as Saudi Arabia-led OPEC+, which includes Russia, continues to cut crude production levels.

The Kingdom decided in September to extend a 1 million barrel per day (bpd) voluntary crude output cut until the end of the year.

Russia, in addition, said it will continue voluntary oil export reduction of 300,000 bpd to the end of the year. The country reduced oil exports by 500,000 in August and 300,000 in September.

The new cuts come on top of the organization's existing production limit of approximately 2 million bpd, which was announced in October 2022 and 1.6 million in May.

Due to output caps and falling US inventories, American oil benchmark West Texas Intermediate (WTI), whose price is based on supply and demand at the heart of the US oil pipeline network in Cushing, jumped 3.6% on Wednesday.

The WTI price climbed to as high as $95.03 per barrel early Thursday -- its highest since Aug. 25, 2022, according to official data.

After rising 2.1% on Wednesday, global benchmark Brent crude rose to as much as $95.34 on Thursday -- its highest since Nov. 15, 2022.

- Price forecasts

The EIA said earlier this month it estimates Brent crude to average $84.46 this year and the WTI $79.65, but those levels have already been surpassed.

In the EIA's previous Short-Term Energy Outlook report, the figures were anticipated as $82.62 and $77.79, respectively.

For 2024, the EIA anticipates Brent crude averaging $88.22 and WTI at $83.22.

Goldman Sachs said last week it expects oil prices to average $100 around this time next year, up from its previous forecast of $93, as it pointed to lower supply from OPEC+ and higher global demand.

The company also warned that prices could hit $107 if OPEC+ continues full production cuts until the end of 2024.