Oil Prices Approach $90 as OPEC+ Maintains Cuts and US Inventory Awaited

Oil prices are on the rise, inching closer to the $90 per barrel mark, driven by reports of declining US crude inventories and the confirmation of ongoing supply cuts by OPEC+ ministers. According to sources familiar with the matter, the American Petroleum Institute (API) indicated a decrease of over 2 million barrels in nationwide stockpiles last week, accompanied by declines in gasoline and distillate inventories.

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During an online ministerial review meeting on Wednesday, OPEC and its allies decided to uphold their existing output cuts, ensuring that approximately 2 million barrels per day of curbs will remain in place until the end of June. This decision comes amid geopolitical tensions and supply disruptions, including conflicts between Ukraine and Russia and ongoing tensions in the Middle East, which continue to lend support to oil prices.

However, concerns have emerged from major consumers regarding sustained high prices. A senior Indian oil official expressed apprehension about the recent price surge and hinted at potential actions if prices remain elevated.

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Nadia Martin Wiggen, a director at Svelland Capital, highlighted the uncertainty surrounding future oil supply, particularly given the slower start to the year for US production and the lack of communication from OPEC+ regarding potential supply increases in the third quarter. Wiggen also emphasized the expected ramp-up in refinery operations in June and July, which could further bolster crude prices.

In the options market, traders are adopting more bullish positions, with Brent's second-month options skew favoring calls over puts. This shift comes as timespreads move deeper into backwardation, signaling market strength and increasing interest in protecting against rising prices.

Also Read: Oil Prices Surge Amid Geopolitical Tensions and Strong Chinese Economic Data