Oil Remains Stable Amid Drop in US Crude Inventories

By Adedapo Adesanya

Crude oil prices were stable on Thursday as stockpiles in the United States fell sharply, lending more support to the market which had been bullish over the past two days.

The price of the Brent crude marginally went up by 0.1 per cent or 7 cents to $71.28 per barrel, while the West Texas Intermediate (WTI) rose by 0.03 per cent or 2 cents to $68.81.

The Energy Information Administration (EIA) reported yesterday that crude inventories in the US shed 5.1 million barrels in the week to May 28, about 3 per cent below the five-year average for this time of the year.

A day earlier, the American Petroleum Institute (API) estimated crude oil inventories had declined by 5.36 million barrels in the reporting period. Analysts had expected the EIA to report an inventory decline of 2.114 million barrels.

Oil prices have risen in recent days on expectations from forecasters, including the Organization of the Petroleum Exporting Countries (OPEC) and its allies, that oil demand will exceed supply in the second half of 2021.

OPEC+ agreed on Tuesday at a ministerial meeting headed by Saudi Arabia and Russia, to stick to its earlier decision to return 2 million barrels per day to the market with the pace being determined by market conditions.

At the same time, the cartel brushed off the possibility of around 2 million barrels per day of Iranian crude returning to the international markets soon, suggesting its outlook for demand was strong enough.

Talks between the United States and Iran over the Middle East country’s nuclear programme has slowed down, which reduced expectations for a return of Iranian oil supplies to the market this year.

There are also supports from renewed economic activities in Europe and the United States, where things have begun to return to normal.

Meanwhile, the market continues to keep tabs on the return of COVID-19 in Asia. In recent days, a sharp rise in coronavirus cases from new variants in parts of Southeast Asia that had been less affected by the pandemic has prompted new restrictions, factory closures and attempts to rapidly scale up vaccination programmes across the region.