Oil Inventories Continue to Rise
Crude Oil prices after Wednesdays EIA report declined 1.45% for the 24 hour period, closing at
92.61 after a report from the Energy Information Administration (EIA) has showed that fuel
stockpiles in the US rose more than expected last week. Stockpiles rose by 5.83 million barrels
to 125 million, surpassing analysts’ estimate of a gain of 2.25 million, while gasoline inventories
surged by 6.24 million barrels to 227 million last week, the highest level since March. The
report also revealed a less-than-expected fall of 2.68 million barrels in the level of the US crude
oil inventories, during the week ended January 3. Analysts had expected the US crude oil
supplies to decline 3.3 million barrels.
A stronger dollar internationally also weighed in with the crude prices. Libya’s Oil minister said that
Libya will take to court any foreign firms trying to buy oil from eastern ports seized by armed
protesters and stop doing business with them.
The first crude has started to flow through Iraqi Kurdistan’s new pipeline across Turkey and the first independent
exports are expected to begin at the end of this month.
Inventories and the past
From a longer-term perspective, crude inventories are much higher than they were in the past
five years at the same point in the year. There’s been a surge in U.S. crude oil production over
the past several years. Inventories had accrued because much of the excess refinery and
takeaway capacity had been soaked up, and it took time and capital for more to come online.
This caused the spread between WTI Cushing (the benchmark U.S. crude, which represents
light sweet crude priced at the storage hub of Cushing, Oklahoma) and Brent crude (the
benchmark international crude, which represents light sweet crude priced in the North Sea) to
The crude markets are under pressure again and it is likely lower prices are yet to come.
Inventory numbers keep rising in the oil markets and traders seem to be trying to test prices
under $90 dollars a barrel. If prices at $92 dollars hold that should remain good support for
the short term trade.
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