Oil Prices Rise as Supply Tightens and Analysts Predict Higher Prices

Oil inventories are starting to decline in certain regions as demand surpasses supply due to production cuts by OPEC leader Saudi Arabia, leading to expectations of higher oil prices in the coming months. Both the International Energy Agency (IEA) and OPEC predict that oil demand will outpace supply this year, resulting in overall inventory draws. While global oil inventories increased in May, signs of tightness are emerging, particularly in the United States. Refineries are running at higher capacities to meet rising summer demand, and a drop in Russian oil exports is also contributing to the decline in inventories. However, there are still significant crude builds in China and Japan, offsetting the drawdown in the Middle East Gulf. Overall, analysts anticipate a fall in inventories in the coming weeks before a potential build-up in the fourth quarter as refineries slow down and higher oil prices incentivize some OPEC+ members to exceed their production quotas.