Oil traders' worries about supply shortages intensified on Thursday and pushed West Texas Intermediate (WTI) prices higher even as the dollar rose and the U.S. government announced it would buy back oil from the state's reserves as early as this fall. to the highest level since March.
By Thursday's close, WTI was up 45 cents at $108.26 a barrel, while Brent crude was up 76 cents at $110.90 a barrel.
Oil benchmarks remain in backwardation, with the spread between the latest two Brent December futures contracts at nearly $13 a barrel on Thursday, more than triple the spread at the start of the year.
OPEC and its allies agreed to increase nominal output by 432,000 barrels per day (bpd) in June. Fatih Birol, executive director of the International Energy Agency, said OPEC could release more oil reserves if needed.
Ajay Parmar, senior oil market analyst at ICIS, said in a research note,
OPEC+ is unlikely to supply the market with additional oil to address the supply crunch as they are happy to see oil prices stay above $100/bbl and they are expected to slowly add oil in 2022.
Another concern for traders is that shale oil has become more expensive to drill and prices have risen sharply. CEOs are reportedly raising annual spending plans to keep crude and natural gas production on track.
APA Corp CEO John Christmann said,
Increasing U.S. oil production will be challenging and financially inefficient given supply chain bottlenecks and shortages of oil equipment and oilfield workers.
Fiona Cincotta, senior market analyst at City Index, said of Thursday's crude oil trading:
Many factors on the supply and demand side are at work, so oil prices fluctuate again. But the market hasn't fully factored in the impact of the EU's ban on Russian oil (voting is still underway), so losses in the oil market may be limited.
