Oil Prices Rise as Supply Disruptions Increase

Asian Trade Sees Oil Prices Hit Five-Month Highs

Oil prices in Asian trade rose slightly on Wednesday, maintaining five-month highs due to indications of shrinking U.S. inventories and potential supply disruptions in Russia. This tighter outlook for global crude markets has led to the surge in oil prices.

Focus on OPEC+ Meeting and Middle East Tensions

The focus now shifts to a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), scheduled later in the day. Expectations predict that the producer group will keep production unchanged. Tensions in the Middle East, particularly after Iran threatened retaliation against Israel, have raised concerns of more supply disruptions in the region, boosting oil prices to levels last seen in late-October.

Brent Crude and WTI Prices Edge Higher

Brent crude expiring in June saw a 0.2% rise to $89.13 a barrel, while WTI prices also increased by 0.2% to $84.42 a barrel by 20:19 ET (00:19 GMT).

Market Outlook and Potential Supply Constraints

Expectations of tighter supplies have pushed oil prices up, overcoming challenges posed by a stronger dollar and uncertainties around U.S. interest rates. Mexico’s decision to cut oil exports further added to the positive sentiment in the market.

US Oil Inventories Decline, Boosting Market Sentiment

Data from the American Petroleum Institute (API) revealed a nearly 2.3 million barrel decrease in inventories, surpassing expectations for a 2 million barrel draw. This marked the third weekly draw in inventories over the past four weeks, indicating a tightening of U.S. oil markets.

OPEC’s Stance on Production Cuts

The OPEC+ alliance is expected to maintain current production levels, signaling that markets have tightened sufficiently through late-2023 and early 2024. This decision follows a commitment to continue production cuts until at least the end of June.

Geopolitical Factors Impacting Oil Prices

In addition to supply disruptions in Russia, recent events, including Ukraine’s attack on a Russian refinery and escalating tensions in the Middle East, have contributed to the volatility in oil prices. The prospect of Iran joining conflicts in the region has added to market concerns, intensifying price movements.