Crude oil price rises on Wednesday amid falling US stockpiles. At the same time, the Organization of Petroleum Exporting Countries (OPEC) continues to adhere to the volumes that limit supply despite the pressure from US President Donald Trump. An additional boost to the commodity prices causes the uncertainty over Nigeria elections and the tension in Venezuela.
The futures on US crude oil WTI with delivery in April rose by 0.88% to 55.99 USD per barrel. The futures on Brent variety increased by 0.64% to 65.63 USD per barrel.
Crude oil inventories in the United States shrank by 4.2 million barrels to 444.3 million barrels in the week ending February 22nd, according to the estimates of the American Petroleum Institute (API). The official data of the Energy Information Administration (EIA) will be released later on Wednesday.
Oil markets have been backed by OPEC+ supply cuts. The OPEC+ group, including OPEC and non-cartel countries, at the end of last year, agreed to reduce oil production by 1.2 million barrels per day to support prices. The group said they would continue to limit supplies despite pressure from Donald Trump to stop artificial tightening of the commodity markets.
According to the analysts, the OPEC+ supply cuts have the necessary result and impacted the markets. Crude oil prices have increased recently, but not because of strong growth and growing demand, but mainly because of political decisions to reduce production by OPEC and its allies.
However, the amount of oil is currently sufficient as US production grew by more than 2 million barrels in the past year to a record 12 million barrels per day. It expected US crude oil production to average 12.4 million barrels per day in 2019 and 13.2 million barrels per day in 2020, with most of the growth coming from the Permian region of the state of Texas and New Mexico.
Moreover, the demand growth is weak due to the global slowdown in the economy and improvement of energy efficiency by the industry.
But anyway, the reduction in OPEC supplies has so far failed to create tensions that have sustained a long-term upward trend in prices.
Supply risk is ever present with Venezuelan tensions brewing a notch higher. Meanwhile, the National Oil Corporation in Libya refusing to start production at the El Sharara field and there is significant uncertainty over elections in top African oil exporter, Nigeria.
Goldman Sachs analysts said that “the near-term outlook for oil is modestly bullish over the next two to three months”, but added that the outlook for later in 2019 was weaker due to a surge in U.S. exports and an “an increasingly uncertain economic, policy and geopolitical backdrop”.
Estimated US oil inventories
The American Petroleum Institute (API) reported a fall of 4.2 million barrels in the US crude oil inventories for the week ending February 22.
In its latest Short-Term Energy Outlook released earlier this month, the US Energy Information Administration (EIA) said the US crude oil prices will fall and crude oil production will increase in 2019 and 2020.
While 2019 has been a wild ride for oil prices, inventory moves for crude have been innocuous, with a net build of 147,000 barrels for the eight reporting periods prior to this week, using API data, with only two big swings that essentially canceled each other out.
The API this week reported a draw in gasoline inventories for the week ending February 22 in the amount of 3.8 million barrels. Analysts estimated a draw in gasoline inventories of 1.686 million barrels for the week.