Why do US crude inventoreis rise, when oil prices soar?

 

US crude oil inventory build-up



Defying logic, the US crude inventories rose for the third successive week, according to the data released by the EIA, US Energy Information Administration and the API, American Petroleum Institute.

The API said on Tuesday that the US crude inventories rose by staggering 5.21 million barrels; the EIA put its figure at 5.3 million barrels, a day later on Wednesday.

The inventory build-up, by a significant margin, left analysts scratching their heads searching for answers, as the expectations were quite the opposite. In fact, API’s own estimate for the week ending October 10 was 0.14 million barrels.

The news indicating surprise increase in the US crude inventories comes at a time when the traffic is on the roads and aeroplanes are in the air, as if things were as if the world was in the pre-pandemic times.

Since it happened at a time when the demand for commodity got a massive boost due to the global crunch in the gas markets, the development adds yet another piece to the crude oil jigsaw that has been baffling analysts and investors alike in recent days.

One guess that could account for the inventory puzzle is the fact that motorists may be reluctant to use oil at the current high prices, while exercising caution when it comes to emptying their pockets.

If manufacturers share the same sentiment in order to cut down on their energy bills, it will spell a disaster in the long run for the economies; they have been complaining about the rising energy costs for weeks and want authorities to get a grip on the crisis.

In a separate development, the energy minister of the UAE, Suhail al-Mazrouei, says the oil sector needs investment in order to avert a crisis similar to what we see in gas sector. With that position, Mr Mazrouei implies that the producers can only do so much in the current circumstances. In short, an exponential increase in production at short notice is neither feasible nor economically viable.

The IEA, International Energy Agency, also expressed the same thing, but only for the renewable sector; it actually does not want people to invest in fossil fuels, heading towards an ideological collision with the OPEC+ .

At present, neither side appears to be prepared to blink; that means, the energy crisis is here to stay until it take its own course in the coming weeks.

 

 

 

 


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