Crude Oil Prices Rise on Strategic Reserve Refill Plans and Middle East Concerns
Oil Prices on the Rise
Oil prices have experienced an upward trend, heading towards a positive week. This increase can be attributed to two factors: the United States’ plans to refill its strategic reserves and mounting fears of the Israel-Gaza crisis spreading throughout the Middle East. The potential disruption in supply has further fueled the rise in oil prices.
Positive Week for Oil Futures
By 09:05 ET (13.05 GMT), oil futures were trading higher, with the futures contract experiencing a 0.9% increase to $89.22 a barrel, and the contract climbing 0.9% to $93.25. Both benchmarks are set for weekly gains for the second consecutive week, with the U.S. contract expected to see a 2% increase and Brent up by 2.8%.
U.S. to Refill Strategic Reserve
The oil market received a boost when U.S. President Joe Biden announced plans to refill the heavily-drawn Strategic Petroleum Reserve. The Department of Energy revealed two separate offers to purchase a total of 6 million barrels of crude oil. These purchases will be delivered between December of this year and January 2024. This decision comes after the U.S. government depleted approximately 200 million barrels from the SPR since early 2022 to combat high gasoline prices resulting from the Russia-Ukraine war.
Middle East Conflict Escalation Concerns
The ongoing Israel-Hamas conflict has also contributed to the rise in crude prices. Israel’s vow to eliminate the Hamas group ruling Gaza, along with airstrikes and preparations for a ground assault, has raised concerns about the conflict spreading further in the volatile region. Recent reports of intercepted cruise missiles and drones launched by the Houthi movement in Yemen, potentially aimed at Israel, have only heightened these concerns.
Resilient U.S. Economy
Federal Reserve Chair Jerome Powell’s comments about the resilience of the U.S. economy have provided additional support to oil markets. Powell’s remarks have sparked optimism that fuel consumption in the country will remain strong. This positive sentiment is reinforced by larger-than-expected drawdowns from the U.S., the world’s largest oil consumer.
Encouraging Economic Growth in China
China’s better-than-expected economic growth, as revealed earlier this week, has also contributed to the optimistic outlook for oil markets. Refineries in China have processed a record 15.5 million barrels per day of crude oil in September, while domestic demand remains robust. These stronger numbers have resulted in a reduction in domestic crude oil inventories.
(Ambar Warrick contributed to this article.)
