Oil prices rise $1 on fears of tight supply

Crude oil prices rose by more than $1 on Wednesday after a tightening in US fuel supplies and inventories. Warnings from Abdulaziz bin Salman Al Saud, the Saudi energy minister, raised speculators‘ prospects of further OPEC+ production cuts.

Brent crude futures rose to $77.52 a barrel, while US WTI crude rose to $73.66 a barrel.

Edward Moya, chief analyst at OANDA, said: „Oil is getting bullish after the Saudi short sellers‘ warning“. He added that Saudi Arabia will likely do whatever is important to contain prices.

Fears of supply constraints rose when Saudi Arabia’s energy minister said he would leave short sellers – those betting on a price drop – „ouching“ and told them to „be careful“.

Many investors took that as a signal that OPEC+ might be thinking about another production cut at its June 4 meeting.

Tina Teng, an analyst at CMC Markets, reported on Wednesday that oil prices have jumped on speculation, and that OPEC+ may continue to cut production in order to maintain price stability.

Oil prices were also supported by Tuesday’s industry data, which indicated that US WTI crude and fuel inventories fell very strongly.

If the Energy Information Administration data, due to be released on Wednesday, confirms the API data, US gasoline inventories will fall for the 3rd consecutive week to the lowest pre-Memorial Day level since 2014.

„If this is confirmed by tomorrow’s EIA report, we will likely start to see some easing of recession fears,“ said Moya of OANDA.

The Memorial Day holiday in the U.S., which falls on May 29 this year, traditionally marks the start of summer travel in the U.S.

Elsewhere, markets remained wary about the US debt ceiling debate, which has again tempered the rise in oil prices. Another round of debt ceiling talks ended on Tuesday with no signs of progress as the deadline for raising the government’s $31.4 trillion borrowing limit or risking default loomed.

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