Oil prices reached their highest point in over a year on Thursday as worries emerged about the global market’s ability to keep up with demand due to planned production cuts.
West Texas Intermediate (WTI), the benchmark for oil pricing in the United States, saw a 0.7% increase, surpassing $95 per barrel for the first time since August 2022 before settling at $94.35. Meanwhile, Brent Crude, the international standard, also rose by 0.7% to hit $97.24.
The Organization of the Petroleum Exporting Countries (OPEC) will convene on October 4th to discuss and potentially implement planned reductions in output. Should members of OPEC reduce production, alongside voluntary cuts agreed upon by Saudi Arabia and Russia, global production could diminish by 1.3 million barrels per day until year-end.
While these production cuts are expected to impact economic growth negatively and potentially increase inflation, central banks, including the Federal Reserve, plan to keep interest rates higher for an extended period to prevent inflation rates from spiking after experiencing a substantial decline this year.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted that rising oil prices are largely driven by concerns regarding limited supplies. Furthermore, she emphasized that big producers like Saudi Arabia have a vested interest in maintaining oil prices within an elevated yet stable range.
Another indication of tightness in the oil market is the report revealing that supplies at the Cushing storage hub in Oklahoma have dropped to their lowest levels since July 2022.
