Crude oil price went up due to fallen US crude inventories

 

The US crude oil inventories dropped during the last week, having been on the rise for six successive weeks, while defying the logic of analysts.

The API, American Petroleum Institute, reported on Tuesday that the US crude inventories fell by 4.585 million barrels, exceeding the expectations; the forecast was a build of 1.9 million barrels.

In response to the surprising news, the price of crude oil went up on Tuesday, only to fall slightly as the day wore on.

Crude oil markets are still edgy as the response of the Biden administration to the rising oil prices is anybody’s guess at the moment.

When the OPEC+ refused to toe the line of the major consumers, President Biden vowed to resort to ‘other measures’, without specifying what they could be.

As the COP26 conference is coming to a close, the Western leaders finally will be able to react to what is happening on the ground due to fossil fuels shortages, with the luxury of being free from the shackles of various pressure groups.

The rising energy costs have already taken its toll on major Asian economies such as Japan and China; the inflation is on the rise and in proportion to that economists fear that the spending power of the consumers in the region will go down.

The global supply chain issues, meanwhile, are adding an extra burden on policy makers; it has led to sharp increase in raw materials too.

The global shortage of computer chips is also of great concern at present: the production of vehicles, both in China and Japan, is down significantly and cooling auto markets will not be able to increase the demand for crude oil in two major markets in the world.

In China, meanwhile, the authorities are taking sweeping measures to cut down on carbon emissions: although coal power plants are still used for generating power, there are policy move in place to reduce the reliance on them gradually.

The EIA, US Energy Information Administration, will release its own data, highlighting the state of US crude oil inventories on Wednesday. If it also says that the inventories are down, analysts will be confident that the demand has finally picked up.