Kristian Rouz — International oil prices are posting steady increases due to higher energy consumption in the US, Saudi Arabia's continued commitment to production cuts and rising global political uncertainty.
Last week, US crude inventories slumped by one million bbl due to higher processing activity and elevated gasoline prices, supported by robust demand ahead of the summer holiday season. This according to a report from the American Petroleum Institute (API), which also found total US oil stockpiles have decreased to 428 million bbl.
"Oil prices are holding near three-year highs reached earlier in April for the time being, and with inventories back in line with normal levels, the supply glut of the last few years appears to be over," William O'Loughlin of Rivkin Securities in Australia said.
Brent oil futures rose to $72.07/bbl in early Wednesday trading in London, whilst US WTI oil was $67.01/bbl overnight — an increase of 0.7 percent from the previous trading session for both benchmarks.
Additionally, the Dutch bank ING upgraded its average global oil prices outlook for this entire year to $66.50 from $60.25/bbl for Brent, and to $62.50/bbl from $57.75/bbl for WTI.
In addition, energy officials from Saudi Arabia have held meetings with their colleagues from other OPEC member-states, seeking continued support for oil prices. The kingdom is eyeing an $80/bbl threshold in the wake of recent developments on the global energy market.
Such an increase in oil prices would also boost Saudi Arabia's fiscal sustainability as most of its budget revenues still come from oil exports.
Additionally, higher oil prices are deemed desirable by Saudi officials ahead of Aramco's IPO slated for next year.
"We believe oil prices will go higher this year and also go even higher in 2019, so we are trying to pick the right time," Saudi Crown Prince Mohammed bin Salman — recognized for his recent crackdown on corruption at the highest echelons of the kingdom's political structure — told reporters.
Global energy markets have rallied as energy investors fear major disruptions in oil supply amidst the elevated tensions in the Middle East, the US-Chinese trade dispute, and the ongoing acceleration in global GDP.
On top of all this, the ongoing economic turmoil in Venezuela — one of the world's largest oil producers — has contributed to the lowered projections of global crude output.
"OPEC production is currently lower than expected as a result of large declines in Venezuelan output caused by the deterioration in the economic situation there," O'Loughlin said.
Currently, the demand side of the global oil market has improved, including increased processing capacity in China. The mainland's oil refineries have processed 12.1 million bpd of crude last month, the highest on record.
This comes as China's GDP has accelerated to 6.8 percent in the first quarter in a year-to-year comparison, signaling a higher demand for fuel both in China and the Far East in general.
This might suggest the global oversupply of oil, crippling the world's major oil-producing economies since mid-2014, might finally be starting to fade.