Crude Prices Rise Amid Worsening Global Oil Supply Deficits

Crude oil prices closed higher on Wednesday as the International Energy Agency (IEA) forecasted that global oil inventories will fall in Q3 at twice the previously estimated rate due to ongoing disruptions from the US-Iran war.

The IEA's monthly report cited the global oil supply deficit worsening despite declining oil demand caused by the conflict and high prices. The group noted that global oil inventories will decrease at a faster pace than expected, tightening supplies and boosting prices.

Oil prices were initially undercut by the bearish weekly EIA report showing US oil inventories rose sharply, but later recovered as tensions remained high in the Strait of Hormuz, where traffic is slow due to the conflict. The lack of progress toward a US-Iran agreement to reopen the strait contributed to rising prices.

OPEC's production increases might be difficult to achieve amid renewed US-Iran military attacks in the region. However, OPEC delegates approved their final increase of +188,000 bpd in crude production for September, aiming to restore all of the 1.65 million bpd supply cutback made back in 2023 and maintain output steady for the rest of the year.