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Oil prices rise as supply tightness and “soft landing” for US economy are in focus

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Oil prices jumped on Wednesday, with Brent crude futures rising by more than $1 a barrel, driven by concerns of supply tightness and the prospect of a “soft landing” for the U.S. economy. The increase in prices comes as the U.S. faces worries about crude stockpiles falling below minimum operating levels at the Cushing storage hub in Oklahoma.

Brent crude futures were up 0.9 percent at $94.81 a barrel, while U.S. West Texas Intermediate crude futures climbed 1.17 percent to $91.45 a barrel. The rise in prices follows industry data released on Tuesday, which showed that U.S. crude oil stockpiles increased by 1.6 million barrels last week, contrary to expectations of a drop.

The concerns about falling crude stockpiles at Cushing, the delivery point for U.S. crude futures, have added to the existing supply tightness resulting from supply cuts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. Further drawdowns at Cushing could put additional upward pressure on oil markets.

While the support from supply cuts by Russia and Saudi Arabia may be limited in the coming months, CMC Markets analyst Leon Li believes that oil prices remain relatively strong due to the tightening of supply. Li also noted that recent economic data from Europe and the United States has weakened, suggesting that oil prices may show a volatile trend in October.

It is unlikely that oil prices will exceed $100 in the short term, but they are expected to remain strong. The U.S. government data on oil inventories, expected later in the day, will provide further insight into the current market situation.

In addition to supply concerns, the temporary ban on gasoline and diesel exports imposed by Russia last week could increase crude oil demand from refineries. While the ban has been partially softened, it may still contribute to upward pressure on oil prices.

In terms of the U.S. economy, Minneapolis Federal Reserve Bank President Neel Kashkari expressed his belief on Tuesday that a “soft landing” is more likely than not. However, Kashkari also warned that there is a 40 percent chance that the Federal Reserve will need to raise interest rates significantly to combat inflation.

On the other hand, the Bank of England, according to a Reuters poll of economists, has concluded its tightening cycle and is expected to keep the Bank Rate at 5.25 percent until at least July. Some economists, however, believe that there is a possibility of further rate hikes later this year.

It is important to note that higher interest rates could lead to increased borrowing costs, potentially slowing economic growth and reducing oil demand.

Overall, oil prices have risen due to concerns over supply tightness and the U.S. economy, with analysts warning of potential volatility in the coming months. The impact of supply cuts by OPEC+ and the ban on fuel exports imposed by Russia could further contribute to the upward pressure on oil prices.

More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )

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