By Adedapo Adesanya
Crude oil prices dropped on Wednesday after the Energy Information Administration (EIA) reported that crude oil inventories in the United States rose for another week.
The global benchmark crude, Brent, lost 53 cents or 0.77 per cent to sell at $67.86 per barrel, while the US West Texas Intermediate (WTI) shed 36 cents or 0.56 per cent to trade at $64.44 per barrel.
The EIA, which serves as an official authority for crude usage, reported an oil inventory build of 2.4 million barrels for the week to March 12.
Although there was a rise, it is down from a build of 13.8 million barrels that was reported for the previous week.
A day earlier, the American Petroleum Institute (API) surprised markets by estimating an oil inventory decline for the same week, of 1 million barrels.
Massive builds in both crude inventories were expected in the past three weeks after the wave of frigid weather swept across Texas prompting the closure of the refinery, meaning stockpiles will rise.
The oil markets have faced a bearish outcome for the past five sessions now and this was further worsened by unfavourable demand news by the International Energy Agency (IEA).
The Paris-based agency said in its annual Oil 2021 report that global oil demand would take until 2023 to return to the pre-pandemic levels of 100 million barrels per day, but COVID-19 would change parts of consumer behaviour forever, with global gasoline demand likely past its peak already.
The agency also hinted that there would be no super-cycle for oil amid a large supply and a large global spare capacity.
“Oil’s sharp rally to near $70 per barrel has spurred talk of a new super-cycle and a looming supply shortfall. Our data and analysis suggest otherwise,” the IEA said in its Oil Market Report on Tuesday.
While some analysts are expecting crude prices to surge near $100 per barrel as coronavirus lockdowns end and travel resume, the IEA, which monitors energy market trends for the world’s richest countries, thinks there is too much oil around global markets for a supercycle to take hold.
The IEA explained that the decision by the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, OPEC+ earlier this month to roll over production cuts during the month of April has built up a hefty amount of spare production capacity.
The OPEC+ group had already agreed in January to keep production steady for February and March. At that time, Saudi Arabia surprised markets by pledging to cut its production by an extra 1 million barrels per day and further agreed to extend its extra cut through April.
Prices continued to hold down as more countries in Europe suspended the use of the AstraZeneca vaccine on blood clotting concerns, pushing back further Europe’s return to normal and the resurgence of another wave of the coronavirus has started.
