US oil benchmark West Texas Intermediate (WTI) has reached its highest price since 2014 above $73 per barrel. Crude prices surged after the United States Department of Energy announced an inventory draw.
American crude supplies declined by 9.9 million barrels for the week ended June 22 – the largest weekly decline so far this year.
“Record crude exports and record refinery runs have combined to yield the biggest draw to crude stocks so far this year,” said Matt Smith, director of commodity research at ClipperData, as quoted by MarketWatch. “Even crude production holding at a record level has been unable to offset strong domestic and international demand.”
WTI crude futures were trading at $73.19 per barrel on Friday. Brent crude futures were trading at $77.76 per barrel, virtually unchanged from their last close and still below the $80 May highs.
The oil market remains well-supplied despite the high demand after OPEC and non-OPEC producers agreed to raise output. “The physical oil market is well supplied,” said Konstantinos Venetis, senior economist at research firm TS Lombard, as quoted by Reuters. He warned that OPEC and Russia were producing at near maximum output “leaving a thinner margin of safety for the future.”
Last week, OPEC and non-member allies led by Russia agreed to boost production by one million barrels per day despite opposition by Iran. Russia had reportedly insisted on an output increase of 1.5 million barrels per day (bpd), while Iran wanted to ditch the deal at first. Saudi Arabia is expected to raise production to an all-time high of 10.8 million bpd in July.
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