Production Cuts Push Crude Prices Higher
September 6, 2023
Prices jumped in yesterday’s trading as the production cuts from Russia and Saudi Arabia are set to continue through the end of the year. Prices did fade late in the day and left some potentially peaking patterns for crude oil and RBOB so it will be interesting to see if the bulls can continue to push prices higher. It is very likely that these markets will continue their rangebound trading.
Gasoline prices are now at the highest seasonal level in more than a decade even as the Labor Day holiday marked the end of the US summer driving season. According to the AAA, the national average for regular gasoline stands at $3.811 per gallon, surpassing the price seen this time last year and marking the second highest level in records going back to 1994.
Low inventories versus the economic outlook and energy demand. These factors have been the concern of the market for a long time now and here we are still debating where all these markets are headed. The current outlook is for this week’s inventory report to show another decline in crude stocks and another drop for stocks at Cushing, OK, which has some traders concerned that Cushing will go empty. This is not a good situation, and it has been compounded by the Biden Administrations earlier use of the SPR to try and manage prices and it might come back to bite us.
The price caps on Russian oil seem to be falling apart. The G7 and allies have shelved regular reviews of the Russian oil price cap scheme, people familiar with the matter told Reuters, even though most Russian crude is trading above the price limits. Russian producers have found ways to sell oil using fewer Western ships and insurance services, making it difficult for the West to enforce the existing price caps. Also, at this point most G7 nations cannot turn down Russian oil because of tight supplies.