US oil prices surge to their highest level in 2023

oil rig
Jim Urquhart/Reuters
  • US crude oil prices hit their highest mark of the year on Wednesday.

  • West Texas Intermediate crude oil moved 3.62% higher to $93.64 a barrel.

  • Prices have been climbing since this summer when OPEC+ slashed global oil supply.

The price of US oil surged to a new 2023 high on Wednesday, with West Texas Intermediate crude up more than 3.4% to trade at $93.75 just before noon in New York.

This week marks the latest surge in what's been a months-long rally for oil prices that kicked off this summer when OPEC+ slashed output.

Brent crude, the international benchmark, topped $96 a barrel, rising 2.5% as prices continue their ascent toward the closely watched $100 threshold.

A possible catalyst for Wednesday's jump could be a new survey from the American Petroleum Institute that showed crude inventories in Cushing, Oklahoma, had fallen to their lowest level in over a year.

More broadly, prices are on the upswing in the second half of 2023 as OPEC+ enacts steep production cuts, primarily led by Saudi Arabia and Russia. After struggling in the first half of the year as international oil prices pierced below the $80 level, Saudi Arabia announced deep cuts to output this spring.

The rise in crude prices has added to the bearish outlook for the economy, with commentators seeing strong headwinds to growth if oil continues to rise. JPMorgan this month predicted that oil could hit $120 a barrel, a level that would bring GDP growth to a halt in the coming quarters.

Bank of America strategists forecasted in a Wednesday note that West Texas Intermediate prices would trade at $90 a barrel in the first quarter of 2024 and then end next year at $86, before falling further to $75 a barrel by the end of 2025.

Meanwhile, they maintained that Brent crude could hover around $90 a barrel by the end of 2024, and then $80 barrel to end 2025. The staying power of oil's big rally in the second half of this year, the bank said, looks uncertain.

"Near term we see considerable uncertainty around the duration of current oil price strength given an uncertain demand outlook, where the OECD has taken the lead in 2023/2024 growth expectations despite perceived fragility of the global economy," the Bank of America analysts wrote. "While the latest round of supply / demand updates from the IEA, OPEC and the EIA point to supply deficits in 2023, there is considerable disagreement on the scale of the supply / demand imbalance."

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