September 8, 2023 [Reuters] – Oil prices settled higher on Wednesday, reversing early declines as traders anticipated further draws on U.S. crude oil inventory following extended production cuts in Saudi Arabia and Russia.
Brent crude futures settled up 56 cents to $90.60 a barrel while U.S. West Texas Intermediate crude (WTI) futures settled up 85 cents to $87.54. Both benchmarks rose by $1 and then pared gains.
“We have pretty low crude supplies in the U.S., with several weeks of big crude oil draws pushing prices up,” said Bob Yawger, director of energy futures also at Mizuho.
U.S. crude oil inventories were projected to fall by 5.5 million barrels in the week ending Sept. 1, according to market sources citing American Petroleum Institute figures released after settlement. Official inventory data from the U.S. Energy Information Administration is due at 11 a.m. EDT (1500 GMT) on Thursday.
Both sets of data arrive a day later than usual due to Monday’s Labor Day holiday.
On Tuesday, Saudi Arabia and Russia extended voluntary oil supply cuts to year end. The Saudi cuts were by 1 million barrels per day (bpd) while Russia has cut 300,000 bpd. These were on top of the April cut agreed by several OPEC+ producers running to the end of 2024.
Both countries will review market conditions and make monthly decisions on deepening cuts or raising output.
Reflecting near-term supply concerns, front-month Brent futures traded near nine-month highs at $4.13 a barrel above prices in six months. The equivalent spread for U.S. WTI futures was as much as $4.88 a barrel, also near nine-month highs.
Oil prices were down early on rate-hike concerns and investor worries about the economy after data showed the ISM non-manufacturing Purchasing Managers’ Index (PMI) came in at 54.5, compared with expectations of 52.5.
Against a basket of currencies, the dollar rose to a high of 105.00, above the six-month high of 104.90 touched overnight. A stronger dollar can weigh on oil demand by making crude more expensive for holders of other currencies.
Analysts warned that price rises could hit demand when U.S. refineries enter their September-October maintenance period. Potentially higher supply from Iran, Venezuela and Libya could also weigh.
Research company IIR Energy said on Wednesday it expects U.S. oil refiners to increase available refining capacity by 274,000 bpd for the week ending Sept. 8.
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