After data revealed that US crude stockpiles decreased by more than anticipated, oil prices climbed on Wednesday, over rebounding demand in the US, coupled with supply side concerns driven by the recent output cut decision by OPEC and other oil-producing countries.
International benchmark Brent crude traded at $85.36 per barrel at 9.55 a.m. local time (0655 GMT), a 0.49% increase from the closing price of $84.94 a barrel in the previous trading session.
At the same time, American benchmark West Texas Intermediate (WTI) traded at $81.05 per barrel, a 0.42% rise after the previous session closed at $80.71 a barrel.
Late Tuesday, the American Petroleum Institute (API) announced an estimated decrease of 4.3 million barrels in US crude oil inventories, more than the market expectation of a 1.8 million-barrel draw.
A strong inventory decrease implies an uptick in crude demand in the US, easing market worries over falling demand.
The uncertainty surrounding how the recent OPEC+ decision to cut production by approximately 3.6 million barrels per day (bpd) beginning in May and lasting until the end of 2023 will impact market supply in support of price increases.
OPEC+ reaffirmed their plan during their 48th Joint Ministerial Monitoring Committee (JMMC) on Monday to maintain oil output cuts of 2 million barrels per day (bpd) until the end of the year, with extra voluntary production cuts of around 1.66 million bpd beginning in May.
Saudi Arabia led the way with 500,000 barrels per day of cuts, followed by Iraq with 211,000 bpd the UAE with 144,000 bpd, Kuwait with 128,000 bpd, Kazakhstan with 78,000 bpd, Algeria with 48,000 bpd, Oman with 40,000 bpd, and Gabon with 8,000 bpd.
Russia also declared that existing production cuts of 500,000 bpd would be extended until the end of the year.
Experts say if fully delivered, the announced cut would further constrain an already fundamentally tight oil market, driving the Brent benchmark towards $100 per barrel sooner than previously expected and pushing the cost of Brent to around $110 per barrel this summer.