Oil Price: US crude oil inventories are back at play in the price equation

 

The oil price has been in decline for the last few days, losing the momentum it used to have up until the latest OPEC+ meeting on March 4.

On some days, the prices of both WTI and Brent were high in the early hours on Asian markets; they, however, quickly died down, falling in line with the current trend.

The rise in oil price during the past few weeks was attributed to the production cuts by the OPEC+; it triggered off a rift between certain countries, which, in normal times, used to be allies, as well; the latest not-so-diplomatic verbal exchange between the Saudi oil minister and his Indian counterpart is a case in point.

The OPEC+ decided to hold on to its production cuts into April and Saudi Arabia decided to extend the existing, voluntary cuts in its production by 1 million bpd into April too.

The cumulative impact evolved into a significant supply constraint and analysts made their calculations based on this development; the forecast was a steady rise in oil price.

It, however, did not materialise in the last few days.

On the contrary, the crude oil price went down: Both Brent and WTI lost nearly 0.2% in the early hours on Wednesday.

As the uncertainty looms over the price of crude oil, a familiar factor that used to influence the price of crude oil has come to the fore - back again.

The US crude and fuel inventories rose considerably during the week ending 12 March 2021 that could clearly account for the stagnation of the price of oil during the past few days.

The latest report from the EIA, the US Energy Information Administration, shows a rise in US crude inventories by 2.4 million barrels in a week, when, by contrast, a forecast for the same by a separate industry report was a decline by 1 million barrels.

Making the outlook even gloomier, the stocks of gasoline and diesel rose as well defying the expectations to the contrary.

On vaccine front, meanwhile, the concerns raised on the potential side effects of a vaccine are slowly resonating with regional political connotations in Europe; it comes at a crucial time, when the vaccine drive is in full swing and the effect was in the countries, which successfully implemented it, for all to see.

The new lockdown fears in Italy, France, Kenya and even India will not be helpful for any market to recover, let alone the oil markets.

With the airline industry still on its knees, the analysts expected the increased activity on the roads; yet, an increase in inventories clearly shows that anxieties are palpable despite the collective successes achieved against the pandemic.