US Oil Prices Surge To Their Highest Level In 2023

The price of US oil rose to a new 2023 high on Wednesday, with West Texas Intermediate crude trading at $93.75 just before noon in New York, up more than 3.4%.

This week’s spike is the latest in a months-long rally for oil prices that began this summer when OPEC+ cut supply.

Brent crude, the worldwide benchmark, surpassed $96 a barrel, up 2.5%, as prices continue to rise toward the closely monitored $100 milestone.

A fresh assessment from the American Petroleum Institute found oil inventories in Cushing, Oklahoma, had plummeted to their lowest level in over a year, which could have triggered Wednesday’s surge.

More broadly, prices are expected to rise in the second half of 2023 as OPEC+ implements significant production cuts, headed mostly by Saudi Arabia and Russia. After struggling in the first half of the year as worldwide oil prices fell below $80, Saudi Arabia announced significant supply cuts this spring.

The spike in petroleum prices has exacerbated the economy’s negative picture, with pundits predicting significant obstacles to growth if oil prices continue to rise. JPMorgan estimated earlier this month that oil might reach $120 per barrel, halting GDP growth in the next quarters.

In a Wednesday note, Bank of America strategists predicted that West Texas Intermediate prices will trade at $90 per barrel in the first quarter of 2024, then decline to $86, before falling further to $75 per barrel by the end of 2025.

Meanwhile, they predicted that Brent crude will be approximately $90 per barrel by the end of 2024, and then $80 per barrel by the end of 2025. The bank is skeptical about the long-term viability of oil’s huge gain in the second half of this year.

“Near term we see considerable uncertainty around the duration of current oil price strength given an uncertain demand outlook, where the OECD has taken the lead in 2023/2024 growth expectations despite perceived fragility of the global economy,” the Bank of America analysts wrote.

“While the latest round of supply / demand updates from the IEA, OPEC and the EIA point to supply deficits in 2023, there is considerable disagreement on the scale of the supply / demand imbalance.”

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