US benchmark crude fell nearly $2 after surging to the highest level in more than a year. While dwindling oil inventories at Cushing, Oklahoma — the delivery point for US futures — have sent key price gauges surging, the rally hit technical resistance with the 14-day relative strength index signaling a correction. Still, the outlook is bullish as supply cuts from Saudi Arabia and Russia continue to tighten the global market. The nearest timespreads for WTI and global benchmark Brent are in extreme backwardation as traders pay bumper premiums to keep crude supplies local. Options trading is showing concerns about bigger price swings.
Since the end of June, West Texas Intermediate has increased by about 30% and is on the verge of posting its largest quarterly gain since June 2020, when prices fluctuated in the early stages of the epidemic. This week, intraday trading for Brent has reached over $97.
OPEC predicted a market deficit of up to 3 million barrels of petroleum per day in the fourth quarter earlier this month. Many in the market now view $100 oil as inevitable, despite the dollar’s rally and ongoing concerns about rising global interest rates, as demand in the US and China has proven to be durable.
Despite the rising prices, demand seems to be maintaining steady. Following an increase in foreign travel ahead of the Golden Week holiday and increased Chinese trucking activity, the world’s consumption of transport fuels increased last week, according to a report from JPMorgan Chase & Co.