Oil Prices Fall Amid Inadequate US Crude Inventories Drop
By Adedapo Adesanya
Oil prices fell on Wednesday as data indicated that crude inventories in the United States fell lesser than what was expected amid worries about the demand that led to a steep selloff earlier in the week.
Brent crude futures dropped 23 cents or 0.55 per cent to $41.53 per barrel while the US West Texas Intermediate (WTI) crude futures shed 28 cents or 0.65 per cent at $39.58 per barrel.
The Energy Information Administration (EIA) data showed that crude inventories in the largest producing nation fell by 1.6 million barrels, less than the forecast of around 4 million barrels.
On Tuesday, the American Petroleum Institute (API), another industry group, reported a build in crude oil inventories of 691,000 barrels for the week ending September 18. Analysts were looking for an inventory draw of 2.256-million barrels.
However, with the drop seen in the official government data from the EIA, it didn’t meet expected figures especially with the renewed worries about an oil glut.
The market continues to come under pressure of COVID-19 infections as countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come from Libya.
In the North African country, the National Oil Company (NOC) expects oil output to rise to more than a quarter of a million barrels per day by next week.
The NOC said it was restarting exports from the Zueitinia oil terminal after checking the security situation at the port and fields that pipe crude there.
An escalation in the country’s conflict led to a blockade of facilities, which is now easing, although analysts say they don’t expect Libya to reach the 1.2 million barrels per day of production it was pumping previously. It will, however, produce close to 300,000 barrels per day.
This new development poses a problem to the cuts regime of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+).
They face a new challenge as Libya, an OPEC member is exempt from the supply cut, and now aims to boost supply after an easing of the country’s conflict. An oil tanker is expected to load crude at Libya’s Marsa el-Hariga terminal this week, the first since January.
This is proving to be a tough month for crude prices as Brent has declined by nearly 8 per cent while the WTI oil prices have lost 7 per cent.