Oil Prices Set To Increase Due To A Tighter Market

Oil Prices Set To Increase Due To A Tighter Market

The demand for oil is boosting the spot crude prices in all areas of the world.

That is a clear trace that the physical oil market is nearing the recent rally of the paper market.

Analysts reported that the increasing appetite for crude oil in Asia and tightening regional markets thanks to modified differentials between regions supported the oil rally.

Asian demand for Middle Eastern and Russian grades priced off the Dubai benchmark is considerable, bringing the spot premiums near to a one-year high.

Simultaneously, the discount of WTI Crude to Brent Crude unofficially affects the arbitrage for U.S. crude to go to Europe and Asia as the under $2/ barrel relents shipping American oil to major clients simply uneconomical.

Due to the drastic changes and imbalances, the regions’ physical crude supply is noticeably tightening.

First of all, it doesn’t make sense to import crude from other regions anymore, as it is uneconomical.

Also, the fact that oil demand is rebounding due to the summer driving season and the decrease in mobility restrictions from the pandemic doesn’t help the situation at all.

In the paper market, Brent Crude already reached a price of $75 / barrel this week, which was a two-year premiere.

WTI Crude went over $73 early on Wednesday as demand increased and U.S. crude oil stocks reportedly diminished by roughly 7.200 million barrels for the week ending June 18.

The crude demand in the U.S. is slowly creeping up as the airline and road travel restrictions get more and more permissive.

Agatha Greer
Agatha is our business/finance specialist. She left her corporate job in Finance after 12 years so she could pursue her dream - that of being a journalist. Besides her job, Agatha is a dedicated mother of two who likes to travel and to spend time with her family.