Oil prices witnessed a notable increase on Wednesday, driven by the tightening inventories in the United States and a warning from the Saudi Arabian energy minister, which raised the possibility of further production cuts by OPEC+.
By 1333 GMT, Brent crude futures climbed by $1.39 or 1.81% to reach $78.23 per barrel, while U.S. West Texas Intermediate crude (WTI) saw a gain of $1.44 or 1.98% to reach $74.35.
The energy minister of Saudi Arabia cautioned short-sellers, who bet on falling prices, to be prepared for potential consequences.
This remark was interpreted by some investors as an indication that the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), might contemplate further reducing output during their meeting on June 4.
OANDA senior market analyst Craig Erlam commented, “Oil prices are trading higher due to the latest short-seller warning from Saudi Arabia,” but cautioned that traders might be tempted to question the credibility of the warning based on past experiences.
The increase in oil prices was further supported by industry data revealing a significant decline in U.S. crude oil and fuel inventories. Market sources, citing figures from the American Petroleum Institute (API), indicated a decrease of approximately 6.8 million barrels in crude inventories last week, alongside a drop of around 6.4 million barrels in gasoline inventories.
Should the Energy Information Administration (EIA) confirm these figures in their report due on Wednesday, U.S. gasoline inventories would have experienced a third consecutive week of decline, reaching their lowest levels before Memorial Day since 2014.
This holiday, observed on May 29 this year, traditionally marks the beginning of the peak summer travel season in the United States, leading to increased fuel demand.
Meanwhile, concerns over broader market conditions arose as another round of discussions on the debt ceiling concluded without any visible progress. With the deadline to raise the government’s borrowing limit approaching, negotiators for Democratic President Joe Biden and Republican Speaker Kevin McCarthy were expected to resume discussions on Wednesday morning.
The rise in oil prices, however, was limited by news that Britain’s persistently high inflation rate fell less than anticipated last month. Official data indicated this outcome, thereby increasing the likelihood of additional interest rate hikes.
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