Amid OPEC+ nations' production cuts leading to tightening crude oil supply, Brent Crude prices have been on a steady uptick, recently breaking the $85 per barrel mark and accumulating a rise of over $10 since the start of the month, nearing its April peak.
As reported by Reuters, analysts from JPMorgan Chase noted this month that oil inventory (including crude oil and fuel products) currently plays a more prominent role in determining oil prices than the U.S. dollar. This is attributed to western sanctions against Russia hastening the trend of oil trades being settled in non-U.S. currencies.
Christopher Haines, an analyst from Energy Aspects, commented that a relatively significant decrease in inventory is expected in July. By the end of August, the trend of increasing inventory will likely reverse. He said they are on the edge of a supply strain, and Saudi Arabia's production cuts have accelerated this process.
Both the International Energy Agency (IEA) and OPEC predict that this year's oil demand will exceed supply, leading to a daily shortage of several hundred thousand barrels in the second half of the year.
IEA data shows that global oil inventory in May increased to the highest level since September 2021. However, signs of tightening oil supply are beginning to emerge, especially in the United States.
According to data from the U.S. Energy Information Administration (EIA), within the week ending July 14, the crude oil inventory at the Cushing storage hub in Oklahoma decreased by 2.9 million barrels, marking the largest weekly reduction in over a year and a half. EIA data also shows that the current U.S. gasoline inventory stands at 217.6 million barrels, the lowest level since 2015, and 5 million barrels lower than the seasonal average of the previous 10 years.
Consulting firm FGE Energy's data reveals that the weekly inventory levels of diesel, jet fuel, and fuel oil in the U.S., Northern Europe, Japan, Singapore, and UAE are all below the five-year average.
JPMorgan Chase notes that the collective production cuts by OPEC+ and Saudi Arabia's additional unilateral production cut of one million barrels per day starting in July are having their anticipated effects. The crude oil supply is indeed tightening. The bank said that the increased demand for travel during the summer is rapidly depleting the oil inventory. Brent Crude is predicted to possibly rise to $86 per barrel by the end of the third quarter, and subsequently fall in the fourth quarter as inventory increases.
However, the inventory decline is not evenly distributed geographically. The inventory reduction in the U.S. and Europe is being offset by inventory increases in China and Japan. At present, there are no signs of a global decline in onshore crude oil inventory.
