By Adedapo Adesanya
Oil prices turned bearish on Thursday as reports of a surprise increase in crude inventories in the United States fuelled renewed oil demand concern.
As a result, the price of Brent crude went down by 22 cents or 0.39 per cent to $55.88 per barrel while the US crude benchmark, West Texas Intermediate (WTI) crude, dipped by 25 cents or 0.47 per cent to close at $52.88 per barrel.
Industry data from the American Petroleum Industry (API) showed that US crude oil inventories rose 2.6 million barrels last week, compared with analysts’ forecasts for a 1.2 million-barrel draw.
This downed the market even as official inventory data from the Energy Information Administration (EIA) has not confirmed the accurate figure. The information has been delayed by two days to Friday due to the Martin Luther King Jr. holiday and Inauguration Day.
Both benchmarks rose over the past two days on expectations of massive COVID-19 relief spending under new US President Joe Biden.
Eyes are also on the possibility of Biden’s administration, as his environment friendly and Pro-Iran policies can be bearish for oil prices in the long term.
The market was also affected by a drop in compliance from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+). The producers altogether saw the oil output cuts compliance stand at 99 per cent in December 2020, down from 101 per cent compliance in November.
This was impacted by oil production increase in Libya, which is exempted from the OPEC+ cuts, increased to 1.22 million barrels per day while Iraq, OPEC’s second-largest producer failed to compensate for its non-compliance after pledging to obey the deal.
The technical and ministerial panels of the alliance will meet in early February to discuss compliance and the state of the oil market, and decisions to be reached could be impactful for the market.
Further impacting prices is the constant surging cases of the coronavirus in China, the largest oil importer in the world.
The Chinese government plans to impose strict virus testing requirements during the Lunar New Year holiday season, when tens of millions of people are expected to travel, as it battles the worst wave of new infections since March 2020.
