Falling US crude inventories keep oil price steady despite Omicron outbreaks

Falling US crude invntories - December


The US crude oil inventories have been falling steadily since the end of November, clearly indicating a strong correlation with the falling prices of the commodity in the international markets.

The API, American Petroleum Institute, released its data on Tuesday that showed a fall of 3.67 million barrels during the past week – much more than its own estimate of 2.633 million barrels.

Analysts await the same from the EIA, US Energy Information Administration, today to see whether the pattern that had been consistent with that of the API in the past few weeks, will continue in the same way.

The price of crude oil fell sharply on Monday, only to recover the lost ground on Tuesday, perhaps boosted by the encouraging US crude inventory data.

As of 10:40 GMT on Tuesday, the price of WTI and Brent were at 71.43$ and $ 74.19 respectively.

In addition to the falling crude oil inventories, investors feel confident about that the possibility of oil markets facing a supply glut is not on the horizon in light of recent geo-political developments, especially in the Middle East.

The talks over reviving the JCPO, 2015 Iran nuclear deal, for instance, have completely lost steam and approaching the point of no-return unless a biblical miracle breaks the ice.

In inverse proportion to the loss of faith in the negotiation process in Vienna, Austria, the threat of major powers turning to unspecified ‘other options’ grow by the day, while Iran boasting about measures to hit back, if attacked.

That means Iran will not be able to release millions of barrels of oil to the crude oil markets while compensating for its revenue losses due to the US-led sanctions.

The crisis in Libya is also a concern: the planned elections are on hold at present; there is dissension among the security staff, who guard the main oil fields, over pay and conditions.

In Iraq, meanwhile, the threat of the ISIS is growing and the attacks, coupled with sabotages, are on the rise, especially at a time when the West tries to get out of the country, curtailing military involvement in the region as a whole in order to focus on other hotspots.

Although the outbreaks of Omicron variant across the globe cause concern among the investors, they hope that the demand of crude oil will not experience a precipitous fall as it happened in 2020; they sense the world, more or less, adapt itself to live with it, rather than perpetually being downcast by its regular impacts.

 

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