By Adedapo Adesanya
Crude prices headed downward by more than 2 per cent on Wednesday as the Energy Information Administration (EIA) reported an inventory build of 2.3 million barrels in the United States for the week to October 1.
The price of the Brent crude fell to $80.75 per barrel after dropping $1.81 or 2.19 per cent, while the United States West Texas Intermediate (WTI) crude was sold at $76.98 per barrel after it dipped by $1.95 or 2.47 per cent.
At 420.9 million barrels, US crude oil inventories are within the limits of the five-year average for this time of the year, the EIA said.
Last week’s inventory move with a surprise build of 4.6 million barrels for the previous week that followed a series of draws over the previous eight weeks.
The oil price rally had paused ahead of the official EIA data when the American Petroleum Institute (API) reported another unexpected oil inventory build for the second week in a row as it recorded a build in crude oil inventories of 951,000 barrels for the week ending October 1 compared to analysts’ expectations for a loss of 300,000 barrels for the week. It is the second week in a row that estimates were on the wrong side.
In the previous week, the API reported a surprise build in oil inventories of 4.127 million barrels—a market shock considering the 2.333 million barrel draw that analysts had predicted for that week.
Ahead of the data release, oil prices were charting the $83 per barrel region with the gas crisis raging on and Monday’s decision by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to keep production plans unchanged instead of increasing production by even more than the 400,000 barrels per day it had planned for November.
The drop in prices will also help ease inflationary pressure that could slow recovery from the COVID-19 pandemic which rose as a result of the price of Brent surging more than 50 per cent this year.
Yet, natural gas has surged to a record peak in Europe and coal prices from major exporters have also hit all-time highs.
In addition, with shale companies in the United States constraining drilling to concentrate on investor returns, output in the world’s largest oil-producing country has not been able to offset OPEC’s efforts to restrict exports.