The price of WTI oil was almost unchanged at the end of last week. WTI was trading in a wide range around the level of $69 per barrel.
The market as a whole remained under pressure from reports about China's plans to supply oil from reserves to reduce high prices. The slow recovery of energy production after the hurricane in the Gulf of Mexico increased expectations of a significant reduction in US oil reserves in the coming weeks, as previous data showed a drop in gasoline stocks by more than 7 million barrels.
China has announced that it plans to auction oil from reserves in several stages. At the same time, the Chinese administration of food and strategic reserves does not specify the amount of oil that will be sold. The news caused some confusion and slowed down the confident upward momentum in the market. In addition, there is a possibility that China's announcement was retrospective, which means that the country could have already used oil from reserves. This is the first ever decision by China to withdraw oil from the strategic reserve in history. The country has been accumulating reserves for many years, but now the government is very concerned about limited supply, rising prices and inflation. China's use of the strategic oil reserve to try to manipulate prices may work in the short term, but not in the long term. An attempt to cool demand by artificially lowering prices during the growth period only stimulates its increase, thereby reducing the available supply, and in the long term leads to an increase in quotations.
Production problems in the Gulf of Mexico are still significant, and the market has already seen a significant decrease in gasoline supplies. According to an estimate by the Bureau of Safety and Environmental Protection at the end of last week, 76.48% of oil production and 77.25% of natural gas production in the Gulf of Mexico are still idle. Hurricane Ida, which hit the Gulf coast in Louisiana, also led to the closure of oil refineries, only some of which have reopened. The suspension of work in the Gulf of Mexico is equivalent to the loss of daily production by 1.4 million barrels. Almost all forecasts still suggest that it will take much longer to normalize production after Hurricane Ida than it was after Hurricane Katrina 16 years ago, when 40% of production has already been restored by this point.
Meanwhile, OPEC+ production increased by 50,000 barrels per day in August, according to a survey by S&P Global Platts. The slight increase came despite the group's decision earlier this month to continue increasing production by 400,000 barrels per day in September. All this ultimately leads to the lifting of production restrictions imposed last year, when the pandemic hit oil demand.
On Thursday, the US Energy Information Administration reported that oil reserves fell by 1.5 million barrels last week ended September 3. This is a small decrease, considering that it fell on a week in which production was significantly limited by the effects of Hurricane Ida. The decline was also significantly lower than the average analysts ' expectations (a drop in inventories by 7.4 million barrels).
The forecast for the coming week expects an increase in the price of WTI oil to the levels of 69.30, 69.50, 69.75, 70 and 70.50 dollars per barrel.