Oil Prices Dip Despite Large US Crude Inventories Draw
By Adedapo Adesanya
Crude oil prices dropped on Thursday even after the Energy Information Administration (EIA) reported that inventories in the United States shed 7.3 million barrels compared with the 5.5 million barrels for the previous week.
At the market yesterday, the global benchmark crude, Brent, lost 74 cents or 1.15 per cent to sell at $63.60 per barrel while the US West Texas Intermediate (WTI) shed 62 cents or 1.01 per cent to trade at $60.52 per barrel.
The American Petroleum Institute (API) had a day earlier seen crude oil inventories down 5.8 million barrels for the week to February 12. This exceeded analysts expectations for an inventory draw of 2.175 million barrels for the reporting period.
This week and the next will likely see further inventory draws due to the refinery outages caused by the frigid weather in Texas, USA. According to industry estimates, more than 3 million barrels per day in refining capacity is off because of power outages and freezing.
This development had initially buoyed prices in the last three days but it appeared to have waned. However, prices may still go higher as the resumption of normal production rates will take a while even after the freezing weather in Texas ends and temperatures return to normal.
Prices also took a fall after reports emerged that Saudi Arabia plans to increase its oil output in the coming months, after a recent big production cut.
Business Post had reported that the oil giant had by its status as the world’s largest exporter slashed one million barrels a day of crude production in February and March in an effort to raise prices.
Now, the kingdom plans to announce a reversal of those cuts when the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) meet next month.
It was gathered that the decision will be taken due to the recent rise in oil prices but the oil market can take comfort in the fact that the output rise won’t start until April, meaning the country will commit to its voluntary cuts through March.
Prices have been steadily recovering in recent months over compliance with OPEC+ output cuts. The market had also reacted positively to progress with vaccination programs, boosting hopes of an economic recovery later in the year.
In addition, oil demand is also picking in China and India, and improvement in mobility and employment in the US have also boosted prices.