Oil Prices Drop, but Ongoing Supply Concerns Limit Declines

By Gina Lee

Oil prices experienced a decline on Wednesday morning in Asia amid ongoing global energy constraints that are tightening the markets for crude and coal.

Brent futures limited their losses as concerns over supply persist. Additionally, the market is responding to the recent decision from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to maintain its planned increase in output.

As of 12:03 PM ET (4:03 AM GMT), Brent crude was down 0.25% to $82.50, while WTI crude slipped 0.13% to $78.83.

The announcement from OPEC+ on Monday stated that the group would continue with its July agreement to increase output by 400,000 barrels per day (bpd) each month, at least until April 2022, without altering this figure.

According to a note from ANZ, "Crude oil extended gains as investors worry about tightness in the market driven by heightened demand due to the energy crisis." The note also pointed out that the OPEC+ increase fell short of market expectations given the global energy crunch, leading to speculation that OPEC might need to respond before the next scheduled meeting if demand continues to rise.

In September, the OPEC joint technical committee projected a supply deficit of 1.1 million bpd for 2021, which may transform into a surplus of 1.4 million bpd in 2022.

In the U.S., crude oil supply data indicated a slowdown in fuel demand from the world’s second-largest oil importer. Data released on Tuesday revealed a build of 951,000 barrels for the week ending October 1, contrary to forecasts that anticipated a draw of 300,000 barrels. Additionally, a build of 4.127 million barrels was reported for the previous week.

Investors are now awaiting further data set to be released later in the day.