Crude oil prices today: WTI rallies as OPEC+ delays production boost
Oil prices slid again as OPEC+ postponed its planned production hike. On Thursday, September 5, U.S. crude oil closed near $69 per barrel. This comes after a steep sell-off in the futures market earlier this week, fueled by fears of oversupply during a period of softening demand. OPEC+ was expected to increase production by 180,000 barrels per day starting in October, but the decision has now been delayed by two months, according to two sources speaking to CNBC.
The delay is largely driven by several factors affecting the global oil market. Andy Lipow, president of Lipow Oil Associates, said in an interview that OPEC is struggling to balance its budget as oil prices fall short of its target range. OPEC members are reportedly aiming for Brent crude oil prices of $85 to $90 per barrel. However, the current market conditions are making it difficult to achieve that.
On Thursday, West Texas Intermediate (WTI) crude, which serves as the U.S. benchmark, dropped by 5 cents, closing at $69.15 per barrel. This marks a 3.5% decline for the year. Meanwhile, the global Brent crude benchmark fell by just 1 cent, closing at $72.69 per barrel, down 5.7% year-to-date.
Despite the decline in oil prices, the market received a slight boost from a significant reduction in U.S. crude oil inventories. According to the Energy Information Administration, crude stockpiles dropped by nearly 7 million barrels in the week ending August 30. Gasoline inventories, however, rose by 800,000 barrels, signaling weaker consumer demand as the summer driving season winds down.
Even with this reduction in U.S. crude stockpiles, the broader outlook for oil demand remains uncertain. Lipow pointed to faltering demand in China, the world’s largest oil importer, as a major concern. Additionally, the end of the U.S. summer driving season is expected to further decrease demand for gasoline.
The market is also facing a seasonal shift as refineries in the U.S. and Europe undergo maintenance, which typically reduces the demand for crude oil. This combination of lower demand and refinery maintenance has contributed to the downward pressure on oil prices.
Gasoline prices have also taken a hit. On Thursday, the price of RBOB gasoline fell by more than 3 cents, settling at $1.92 per gallon. Year-to-date, gasoline prices have declined by 8.4%, reflecting the softer demand.
Natural gas, however, bucked the trend. The October contract for natural gas rose by 10 cents, closing at $2.25 per thousand cubic feet, marking a 5% increase. Despite this gain, natural gas prices are still down by 10.3% for the year.
The sharp drop in oil prices this week has erased all of the gains crude had made earlier in the year. This sudden sell-off has raised concerns about the future trajectory of oil prices. Lipow highlighted that OPEC+ will need to monitor these developments closely as the market adjusts to shifting demand patterns and a potentially prolonged period of low prices.
While the short-term outlook for oil appears challenging, market watchers will be paying close attention to any further moves by OPEC+ and its response to the changing dynamics of global oil supply and demand. As it stands, the delayed production hike adds another layer of uncertainty to an already volatile market.
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