US Stockpile Concerns Drive Crude Oil Above $96 a Barrel

Oil prices saw a remarkable surge of nearly 3 percent, reaching a fresh 10-month high on Wednesday, with the potential to approach the $100 per barrel mark. This significant uptick was largely attributed to concerns arising from lower than anticipated US stockpile figures, further accentuating worries about the tightening global supply of crude oil.

The internationally recognized benchmark, Brent crude, climbed to a peak of $97.06 per barrel during intraday trading, marking its highest level since November 2022. However, it slightly trimmed its gains to settle at $96.55. Simultaneously, its US counterpart, West Texas Intermediate (WTI), experienced a substantial increase of 3.6 percent, reaching $93.68 per barrel. This rally was fueled by data from weekly government reports, revealing a reduction in stockpiles at a pivotal delivery hub.

The latest report issued by the Energy Information Administration (EIA) unveiled a decrease of 2.2 million barrels in US commercial crude oil inventories compared to the previous week. This data further exacerbated concerns over dwindling supply. Additionally, the delivery point for WTI recorded inventories at their lowest point in over a year.

Ole Hansen, the Head of Commodity Strategy at Saxo Bank, commented on the market dynamics, stating, "The price correction we saw last week has run out of steam, and market momentum is pointing to higher prices."

The surge in oil prices has been a consistent trend, with a 30 percent increase observed since June. This notable uptick can be attributed to a series of supply cuts announced by some of the world's largest oil producers, with these cuts scheduled to persist until the year's end. These developments have heightened investor concerns regarding ongoing inflationary pressures in the US and Europe.

Energy stocks registered notable gains in response to the surging oil prices, with industry giants such as ConocoPhillips and ExxonMobil witnessing increases of 3 percent and 3.3 percent, respectively.

In Europe, the Stoxx Europe 600 index, which represents the broader European market, concluded the day with a 0.2 percent decline. This marked the fifth consecutive day of losses for the index.

On the bond market front, US government bonds extended their recent significant sell-off, which had been prompted by the Federal Reserve's hawkish guidance indicating that interest rates were likely to remain elevated due to persistently high inflation levels. Yields on the benchmark 10-year Treasury increased by 0.05 percentage points to reach 4.61 percent on Wednesday, marking a post-2007 high. Similarly, yields on the 30-year note advanced by 0.03 percentage points to reach 4.72 percent.

The US dollar, which typically strengthens in anticipation of higher interest rates, experienced a 0.4 percent increase against a basket of six peer currencies, reaching a 10-month high.