By Adedapo Adesanya
Crude oil fell on Wednesday after the Energy Information Administration (EIA) reported an inventory build of one million barrels for the week to November 5 in the United States.
In the previous week, the agency reported a build of 3.3 million barrels, while analysts had expected a build of 1.9 million barrels for the period under consideration.
At 435.1 million barrels, the EIA said crude oil inventories were 7 per cent below the five-year average for this time of year.
This development weakened the price of the Brent crude futures by $2.14 or 2.5 per cent to $82.64 a barrel and depleted the US crude grade by $2.81 or 3.3 per cent to $81.34 per barrel.
The market was also hit by consumer inflation data in the world’s largest oil-consuming nation, the US, as prices were rising at a 6.2 per cent year-over-year rate, their fastest rate in three decades.
And the fear that this may spur both the White House and US Federal Reserve to take action to head that off worsened the situation.
Oil prices got a boost earlier this week after the US government lifted travel restrictions for visitors from abroad—a move seen to provide strong support to jet fuel demand, which has been lagging behind other fuels because of such restrictions.
In addition, the EIA said in its Short-Term Energy Outlook that demand for oil and oil products was recovering much faster than supply, driving prices higher.
But this is not good as the imbalance is pushing retail fuel prices much higher than and the US government was reportedly considering the release of crude from the strategic petroleum reserve.
According to analysts, such a release may not do much about prices in the long term.
As for the US Federal Reserve, there are expectations that they will try to stop the ongoing increase in prices, which has lasted longer than originally anticipated and this spurred an increase in the price of the US Dollar, which oil is priced in.
With the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, along with other exporting allies, known as OPEC+ maintaining a steady increase in output and pushing prices higher in the long run, this could encourage the US shale oil industry to unleash one million barrels per day into the global market.
Dipo Olowookere