Oil prices jumped more than 1% on Friday after the latest report on US oil inventories, which showed they dropped by 6.1 million barrels in the week ending August 18. Crude output is also jeopardized by voluntary cuts by some OPEC member states. Additionally, markets are awaiting Federal Reserve Chair Jerome Powell’s remarks on further interest rate hikes later in the day. West Texas Intermediate (WTI) for October contracts increased by 1.37% to sell at $80.12 per barrel at 6:06 am ET, while Brent for the same month’s settlements gained 1.39%, going for $84.51 a barrel a minute later. A strong dollar makes oil more expensive for holders of other currencies, denting demand.
Meanwhile, inventory draws have recently come through in convincing fashion, Morgan Stanley analysts wrote in a note.
The bank expects Brent crude prices to be well supported around $80 per barrel, with crude likely to remain in a deficit over the rest of this year before returning to a small surplus in early 2024. However, the likelihood of crude deficits is no foregone conclusion, said John Evans of oil broker PVM. Talks between Turkey and Iraq’s semi-autonomous Kurdistan regional government on northern Iraqi crude oil exports are set to continue after officials failed to reach agreement this week on a resumption of exports. Turkey stopped Iraqi oil flows via Ceyhan port on March 25 after losing a long-standing arbitration case brought by Iraq. Iran’s oil minister, meanwhile, has been quoted by state media as saying he expects the country’s crude oil output to hit 3.4 million barrels per day (bpd) by the end of September, even though U.S. sanctions remain in place. Elsewhere, U.S. officials are drafting a proposal that would ease sanctions on Venezuela’s oil sector, paving the way for more companies and countries to import its crude oil. Norway’s Equinor on Friday said it started production at its extended Statfjord Ost field six months ahead of schedule. “The support to oil prices from previous production cuts has ebbed,” Haitong Futures analysts said. Several analysts expect Saudi Arabia to extend its voluntary oil production cut of 1 million bpd for a third consecutive month into October.