Oil rises 1% on signs of tightening supplies

Oil prices climbed by 1% on Wednesday amid escalating geopolitical tensions in the Middle East and evaluations of imminent supply constraints.

U.S. West Texas Intermediate crude futures (WTI) surged by 87 cents, or 1.1%, settling at $77.91 per barrel, while Brent crude increased by 69 cents, or 0.8%, reaching $83.03 per barrel.

Contracts tied to short-term deliveries have consistently traded at a significant premium compared to longer-dated contracts in recent months, reflecting a market structure known as backwardation, indicating tight supply conditions.

“Timespreads are showing markets tightening,” commented UBS analyst Giovanni Staunovo, noting declines in crude stocks in the Amsterdam-Rotterdam-Antwerp trading hub and reductions in product stocks in Fujairah last week.

Further bolstering the market, U.S. refineries are exhibiting signs of emerging from maintenance after operating at their lowest rates since December 2022, leading to increases in crude stockpiles.