Adedapo Adesanya
By Adedapo Adesanya
Crude oil prices settled higher on Wednesday as there was a drop in crude stockpiles in the United States, according to the Energy Information Administration (EIA).
The agency disclosed yesterday that there was a draw of 1.7 million barrels for the week to May 21 and at 484.3 million barrels, the EIA said crude oil inventories are below the five-year seasonal average.
Analysts had expected the EIA to report an inventory decline of 1.279 million barrels for the period after it reported a build of 1.3 million barrels for the previous week.
This is coming after the American Petroleum Institute (API) reported a minor crude draw of 439,000 barrels for the week ending May 21, below the predicted draw of 1.050 million barrels for the week.
In the previous week, the API reported a modest build in oil inventories of 620,000 barrels after analysts had predicted a larger build of 1.680 million barrels.
These data pushed the price of the Brent crude higher on Wednesday by 16 cents or 0.23 per cent to $68.81 per barrel and expanded the West Texas Intermediate (WTI) crude by 8 cents or 0.17 per cent to $65.96 per barrel.
The oil market has not recorded much activity since the Iranian deal turned out that it might not be finalized as quickly as previously anticipated. This has since seen traders relax the fear of more of the commodity entering the market.
However, many continue to closely monitor developments in the Iranian-US nuclear talks which could lead to lifting sanctions on Iran’s energy industry.
The country, which is a member of the Organisation of the Petroleum Exporting Countries (OPEC) could provide an additional supply of about 1 million to 2 million barrels per day if a deal is struck.
Prices have found support from the lifting of coronavirus lockdown in some parts of the world including the United States and Europe.
Russia has called on OPEC and its allies, a group known as OPEC+, to consider a possible increase in Iranian output when assessing further steps.
OPEC+ is bringing back 2.1 million barrels per day of oil production through July, easing cuts to 5.8 million barrels per day. The next meeting is set for June 1.
While the near term outlook for oil demand is not looking strong, the second half of the year promises to look better as analysts like a top investment bank, Goldman Sachs, reiterated its price forecast for Brent at $80 per barrel by the fourth quarter of the year, even with additional supply from Iran once the US sanctions are lifted.
