Early Friday morning, crude oil prices went up because people are still worried that the oil market will stay tight because the G7 agreed to a fixed price cap on Russian crude.
By 10:30 a.m., WTI had gone up by almost 5% because the Strategic Petroleum Reserve was almost done releasing oil. During the time that the SPR released about 180 million barrels, from April until now, commercial crude oil stocks went up by between 20 and 30 million barrels.
Now that the SPR reports are out of the way, the market is worried about a big drop in the amount of oil in the U.S. By then, WTI had gone up to $92.37. Friday, the dollar fell by 1.6%, which helped the price of WTI because it became a lot more appealing to people who hold other currencies.
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On December 5, sanctions against Russian oil put in place by the U.S. and its G7 allies will go into effect. Most people expect that this will cut Russia’s oil exports by at least some amount. Sanctions on Russia’s crude oil, the end of SPR releases, a falling dollar, and expected production cuts by OPEC+ all come together with stubbornly flat U.S. oil production to create the perfect storm for high oil prices.
The Energy Information Administration says that U.S. crude oil production hasn’t changed much since mid-April when it was 11.9 million BPD.
“The increasingly gloomy macro outlook is providing some strong headwinds to the oil market and without the supply cuts announced by OPEC+ back in October, we would likely have been trading at much lower levels,” said Warren Patterson, ING’s Head of Commodities Strategy told Reuters on Friday.
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