Oil prices rise for third day in a row on falling US crude stocks

Saudi Arabia's Energy Minister has told oil market short sellers to 'watch out' ahead of June 4 Opec+ meeting

Pump jacks in front of a drilling rig in Midland, Texas. Reuters
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Oil prices rose for the third day in a row on Wednesday after a drop in the US crude inventories and as comments from Saudi Arabia’s Energy Minister fuelled hopes of an Opec+ output cut.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.29 per cent higher at $77.83 a barrel at 4.30pm UAE time on Wednesday. West Texas Intermediate, the benchmark for US crude, was up 1.49 per cent at $74 a barrel.

“Oil prices are trading higher again, buoyed by the latest short-seller warning from Saudi Arabia,” said Craig Erlam, senior market analyst at Oanda.

On Tuesday, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman told oil market short sellers to “watch out” as traders turn bearish on concerns over a recession and the US potentially defaulting on its debt.

“I keep advising them that they will be 'ouching'. They did 'ouch' in April,” said Prince Abdulaziz during the Qatar Economic Forum.

The Opec+ group of 23 oil-producing countries is set to meet on June 4.

Brent crossed $85 a barrel in April after some Opec+ members announced voluntary production cuts of 1.16 million barrels per day.

“Coming over the weekend again, traders may not be in quite the same mood to test the group's resolve as the market gapped significantly higher last time,” said Mr Erlam.

“That said, a failure to follow through could see prices move sharply in the other direction.”

US crude inventories, an indicator of fuel demand, fell by 6.8 million barrels last week, according to data from the American Petroleum Institute.

Futures have also been supported by optimism around a US debt deal.

Negotiations to avert a US debt default remain unresolved, with talks resuming on Tuesday after President Joe Biden and the Republican Speaker of the House failed to reach agreement before a June 1 deadline.

A default would hit American consumers and send shock waves across the entire global financial system.

It would take currency markets to places “the world’s not seen before” and that in turn would affect energy prices and trading as most of the crude oil is exchanged using the US dollar, Saugata Saha, the president of S&P Global Commodity Insights, told The National in an interview.

“It will likely lead to severe recessions, which again will have an impact on energy consumption and demand,” he said.

Updated: May 24, 2023, 1:17 PM