A Look Back

The start of September brought with it the highest brent crude prices of 2023 (reaching $89/barrel on Monday morning) following another week of bullish momentum. The 5.3% increase in the last 7 days follows a continued market storm of record demand, producer supply cuts, and rising storage costs.
 
The US market also registered notable gains last week with WTI climbing over 6% to $86.6/barrel. A tight crude market in the US looks set to continue into 2024, with US inventories dropping 10.6m barrels last week, hitting the lowest level since December. The continued combination of increasing demand and tightening supply continues to dominate the oil market, and remains the primary factor in this bullish market.
 
Looking Ahead

Now that 2023 highs have been reached, the remaining third of this year looks likely to prove pivotal in the global oil market. World demand is poised to hit a record high this year, according to the International Energy Agency despite the slow economic recovery of China. The IEA expects that oil supply will not match this increase in demand, taking into account the continued supply cuts from the Middle East and Russia.
 
Key market stakeholders will also be wary of oil storage costs as we move in Q4 of 2023. Following interest rate hikes in the US and Europe, storage costs have become a key driver in the recent uptick in prices. Christopher Haines – an Analyst at Energy Aspects – comments: ‘It’s going to be pretty difficult to incentivize that storage’ given the high costs, which may have subsequent impacts on the longer term market.