Adedapo Adesanya
By Adedapo Adesanya
Oil prices marked gains on Wednesday despite data showing a build in the United States crude stockpiles.
The prices had fallen at early trading hours on the news, but Brent crude recovered 25 cents or 0.58 percent to trade at $43.33 per barrel, while the US West Texas Intermediate (WTI) crude pulled back 32 cents or 0.79 percent to sell at $40.93 per barrel.
Crude oil inventories in the United States swelled by 5.7 million barrels in the week to July 3, the Energy Information Administration (EIA) reported.
Analysts had expected an inventory decline of 3.114 million barrels for crude oil in the period, while the American Petroleum Institute (API) reported a crude build to the tune of 2.048 million barrels.
Previous gains of prices in the short term have been affected by global growth concerns, rising US stockpiles and coronavirus related developments and with the rise in inventories, it might signal problems that traders faced in previous months.
Last week, the EIA had reported a significant inventory drop of 7.2 million barrels, while analysts had only anticipated a drawdown of less than a million barrels, bringing about worries to the low level of prediction accuracy.
Increases in the price of oil have been limited over the last week, only supported by the Organisation of the Petroleum Exporting Countries (OPEC) production cuts but pressured by the rising number of new coronavirus cases, which could affect any oil demand recovery the market is starting to see.
Also, the forecast for US crude output to fall less than anticipated in 2020 added to worries about oversupply.
The EIA said crude oil production in the largest producing nation, the US, is expected to fall by 600,000 barrels per day in 2020, a smaller decline than the 670,000 barrels per day it forecast previously.
However, it also expects global oil demand to recover through the end of 2021, predicting demand of 101.1 million barrels per day by the fourth quarter of next year.
Analysts noted that expectations that the OPEC and allies would reduce oil output cuts to 7.7 million barrels per day from August and softer US equities are adding to pressure on the commodity.
Abu Dhabi National Oil Co (ADNOC) plans to boost oil exports in August, the first signal that OPEC and its allies, together known as OPEC+, are preparing to ease record oil output cuts next month.
Key ministers of the OPEC+ are due to hold talks next week, July 15, to discuss next steps about their deal on record output cap that will run to the end of July and then start tapering. There have been no discussions on if there will be an extension to August yet.
The market is also attentive to the news that an OPEC member, Libya, was adding to global supplies by reopening its Es Sider oil terminal for exports, a move that could depress prices, as it will be exempted from making any cuts due to its circumstances.
