New Delhi: Oil prices jumped nearly 4% on Tuesday as Saudi Arabia proposed OPEC+ supply restrictions to maintain prices in the event of returning Iranian petroleum and a drop in US stocks.
According to statements Abdulaziz bin Salman made to Bloomberg, the Saudi energy minister stated OPEC+ had the tools to address problems, including reducing output. This information was reported on Monday by the Saudi state news agency, SPA.
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Benchmark Brent crude increased $3.74 or 3.9 percent to settle at $100.22 per barrel. At $93.74 per barrel, US West Texas Intermediate crude finished the day $3.38, or 3.7 percent, higher. WTI recorded its strongest settlement since August 11 and Brent closed at its highest price since August 2.
In recent weeks, prices have fallen and set the tone for OPEC+, according to Bob Yawger, director of energy futures at Mizuho. These factors include the potential for a resumption of Iranian crude production, concerns about the economy, weekly buildup at the US crude oil storage hub, a decline in gasoline demand, and the impending season for refinery maintenance.
“That is the situation that’s getting the Saudi oil minister a little bit beside himself,” Yawger said. “He was stressing the point that the dynamics were a bit out of whack with reality.”
The Saudi minister said that the paper and physical oil markets have “disconnected” in remarks published on Monday.
A nuclear agreement between Iran and the West would coincide with Iran’s return to the oil markets, according to nine OPEC sources who spoke to Reuters on Tuesday.
In order to revive an agreement, Iran had waived some of its core objectives, a senior US source told Reuters on Monday.
Oil prices have risen dramatically in 2022, almost reaching an all-time high of $147 in March as supply issues were made worse by Russia’s invasion of Ukraine. Prices have since been affected by worries about a worldwide recession, rising inflation, and lower demand.
Although Brent’s price has declined significantly from its high for the year, the physical oil market’s market structure and price differences continue to indicate a constrained supply.
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The most recent US inventory weekly data are anticipated to show that oil stocks fell by 900,000 barrels last week, underscoring the tight supply. According to market sources citing American Petroleum Institute estimates on Tuesday, US crude stockpiles were anticipated to have decreased while fuel stocks increased in the most recent week.
The week ending August 19 saw a roughly 5.6 million barrel decline in crude stockpiles. According to the sources, who spoke on the condition of anonymity, gasoline stockpiles increased by approximately 268,000 barrels while distillate stocks increased by approximately 1.1 million barrels.
