Oil prices continue to plummet on Wednesday after US crude stock inventories continue to rise in the midst of an OPEC deal to stabilize oil prices and cut global oversupply.
The American Petroleum Institute said on Tuesday that crude inventories have risen by 4.5 million barrels in the week that ended last March 17 to a total of 533.6 million going way above analysts expectations of an additional 2.8 million barrels. The API data also showed that refinery crude increased by 224,000 barrels per day. US crude imports have risen by 615,000 barrels per day last week to 7.9 million barrels per day.
Despite analysts also expecting a rise in gasoline stocks, the API data revealed that gasoline stocks fell by 4.9 million barrels higher than consensus estimates of 2 million barrels. Distillate fuel stockpiles including diesel and heating oil also fell by 883,000 barrels but did not meet expectations of a 1.4 million barrel decline.
Falling Oil Prices
The U.S. West Texas Intermediate(WTI) crude futures fell 0.4% at $48.08 per barrel down by 18 cents.
Brent crude futures also fell by 17 cents or 0.3% to $50.79 per barrel as concerns on U.S. inventories continue to rise blocking any efforts being continuously made by the OPEC in cutting global production.
Despite the rising crude data from the API, the US Energy Information Administration is set to deliver the official oil storage data on Wednesday and can turn the oil price direction around.
Should the EIA report similar numbers to that of the API, crude oil prices are to head down further while any updates from the OPEC in their agreement to cut production will undermine any concerns raised by the rising US Crude inventories.
OPEC’s plan currently has not been able to successfully drive the prices near breaking out of the $60 level although it hit as much as $55.24 at the beginning of the year as some OPEC countries have started early in cutting their daily output including countries such as Saudi Arabia.
Although the United States isn’t part of the OPEC, the markets have also been concerned increasingly on the US’s role in the crude market given the rising daily production and stockpiles. The financial markets are also losing their confidence on the OPEC which has failed to show any significant change in the production numbers.
According to Goldman Sachs, the rising U.S. shale production could lead to an oversupply by 2018 or 2019.
Long Liquidation To Keep Dragging Prices
Despite the OPEC decision sending oil prices up by as much as $54.50, the markets are now currently unsure to whether how the OPEC can still stabilize oil prices as promised with the rising US oil inventories.
The declining net length positions are now at record levels and with the market falling below the pre-production cut levels,
While oil prices remain under pressure and headed for a decline thanks to rising US inventories, the oil markets are also awaiting signs of declining numbers from OPEC countries and with the current long liquidation taking place, prices can now sink by as much as $45 which were the levels prior to the OPEC deal where prices have risen by as much as $55.