Oil prices surged on Thursday amid signs that the supply of crude will remain tight despite US efforts to release more oil into the market.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.04 per cent higher at $92.45 a barrel at 9:30pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.85 per cent at $86.28 a barrel.
US crude oil stocks fell unexpectedly by 1.7 million barrels last week, data from the US Energy Information Agency, which tracks weekly changes in the number of barrels of commercial crude oil held, showed.
On Wednesday, President Joe Biden announced plans to put 15 million barrels on the market, the final tranche of oil from a programme announced early this year to release 180 million barrels of crude from the country’s Strategic Petroleum Reserve.
Mr Biden plans to replenish stocks when US crude begins to trade at about $70 a barrel.
"With the recession fears already priced in, and with the US having played its ‘strategic oil reserve’ card, there is not much left to pull the price of a barrel below the $80 to $82 range," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In a report on Wednesday, UBS said further releases from the SPR would not fix any structural imbalance caused by years of underinvestment and the world’s “ever-rising thirst for oil”.
The Swiss lender said oil markets would remain tight over the coming years due to chronic underinvestment in new projects and an increased focus on capital discipline in the US shale patch.
Brent crude rose by about $14 after the Opec+ alliance of oil-producing countries decided to slash its collective output by 2 million barrels per day, the biggest output reduction since the onset of the Covid-19 pandemic in 2020.
Oil prices have also been rising on a looming EU ban on Russian crude and oil products.
The EU’s deadline to stop importing Russian waterborne crude is on December 5, while a ban on refined products takes effect on February 5.
The announcement from the US administration was enough to push crude oil prices slightly lower this week but "bullish" momentum is building that the EU’s latest sanctions on Russian petroleum could exacerbate the market tightness, said Ehsan Khoman, head of emerging markets research at MUFG Bank.
Russia, which is currently embroiled in a conflict with Ukraine, will continue to export crude to some European countries after the ban.
However, it will still need to find a new market for more than 1 million bpd of crude by December, UBS said.
