Brent Hits $100 Again on Possible Supply Cut

Brent crude returned to the $100 mark on Tuesday, rising $3.74, or 3.9%, to $100.22 per barrel as Saudi Arabia floated the idea of cutting output to support prices in the event of returning Iranian crude.

In addition, the price of West Texas Intermediate (WTI) crude in the United States rose by $3.38, or 3.7%, to $93.74 per barrel. This meant that Brent closed at its highest price since August 2, and WTI closed at its highest price since August 11.

Saudi Energy Minister Prince Abdulaziz bin Salman stated that the Organization of Petroleum Exporting Countries and Allies (OPEC+) has the capacity to deal with challenges such as production cuts.

According to the Saudi minister, the paper and physical oil markets have become “disconnected.”

However, OPEC+ production cuts may not be imminent and would coincide with Iran’s return to oil markets if the Middle East and the West agreed on a nuclear deal.

The prospect of resuming Iranian crude supply and recession fears had gripped the market over the past few weeks.

It was reported that Iran had dropped some of its main demands on resurrecting a deal on Monday.

Oil has soared in 2022, coming close in March to an all-time high of $147 after Russia’s invasion of Ukraine exacerbated supply concerns. Fears about a global recession, rising inflation and weaker demand have since weighed on prices.

Underlining tight supply, the latest US inventory weekly reports are expected to show crude stocks declining 900,000 barrels last week.

U.S. crude stockpiles were expected to have fallen, while fuel stocks rose in the latest week, according to market sources citing American Petroleum Institute (API) figures on Tuesday.

API reported a large draw this week for crude oil of 5.632 million barrels, while analysts predicted a draw of 448,000.

The build comes as the Department of Energy released a massive 8.1 million barrels from the Strategic Petroleum Reserves (SPR) in the week ending August 19, leaving the SPR with just 453.1 million barrels.

According to API data, US crude inventories have shed some 67 million barrels since the start of 2021, with a 4 million barrel gain since the start of 2020.

In the week prior, the API reported a draw in crude oil inventories of 448,000 barrels after analysts had predicted a draw of 117,000.

The market will await the official government data due Wednesday from the US Energy Information Administration (EIA).