Oil prices experienced a notable surge in response to two significant developments: a decline in US crude stockpiles and a drone attack on a major Russian refinery.
West Texas Intermediate (WTI) crude oil saw a 2.8 percent increase, settling near $80 per barrel following the release of a government report revealing a 1.54 million-barrel reduction in US crude inventories over the past week. Despite falling short of the 5.5 million barrels projected by industry analysts, this marked the first drawdown in US stockpiles in nearly two months, prompting a bullish response from the market.
The bullish sentiment was further bolstered by news of a Ukrainian drone strike targeting a Rosneft PJSC refinery in Russia, with a daily production capacity of 340,000 barrels. This attack is the latest in a series of incidents targeting Russian oil-processing facilities and underscores heightened geopolitical tensions in the region. While refinery outages typically result in increased crude inventories, the attack highlighted the geopolitical risks influencing oil markets.
Despite earlier concerns regarding OPEC's supply cuts stalling and persistent US inflation, benchmark oil futures have remained within a relatively tight trading range throughout the year. The Energy Information Administration's projection of faster-than-expected US oil production growth offers some relief, potentially offsetting the impact of OPEC+ cuts. Furthermore, data compiled by Bloomberg indicate that US exports to Europe are on track to reach a new record this month, contributing to global supply dynamics.
The recent rally in oil prices highlights the sensitivity of the market to geopolitical events and inventory data. Moving forward, market participants will closely monitor developments in geopolitical hotspots and supply-demand fundamentals to assess the trajectory of oil prices in the near term.
