Oil prices plunged on Wednesday as the increase of last week’s U.S. crude stockpiles came out larger than expected.
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The U.S. Energy Information Administration (EIA), a government agency, says crude prices could be as high as $150 per barrel now if not for new domestic production.
“Here we are, mired in the $40 levels, while production ticks higher and inventories stand at over 100 million barrels higher than this time past year”.
Stocks of crude rose by 2.8 million barrels in the week ending on October 30, and have increased in each of the last six weeks, by a total of nearly 29 million barrels. The USA dollar rallied overnight to its highest in three months against the euro following a strong jobs report which strengthens the Federal Reserve’s case to hike interest rates in December. Many on the market expect the USA central bank to raise the rates at its meeting in December, a decision which would have knock-on effects on the dollar, the main currency for commodities.
About a week ago both BP and Shell benchmarked their respective medium term strategies to a crude oil price of US$60 per barrel, implying a degree of optimism that the worst of oil’s decline was now behind the market.
USA crude for December delivery dropped 2 cents to $47.88 a barrel, after closing up $1.76, or 3.8 percent.
“Oil inventories have built by a fairly chunky amount despite refinery utilization increasing, and imports dropping”, said Matt Smith, director of commodity research at energy database and consultancy ClipperData.
US crude was up 12 cents at $46.44 a barrel in thin trade by 0100 GMT.
While the rest of the world continues to guess about the future of the oil market, a new OPEC report marked “CONFIDENTIAL” has leaked that provides a few insight into OPEC’s long-term strategy and long-term oil price projections directly from the organization itself. The share price of $6.15 is at a distance of 21.06 percent from its 52-week low and down -79.01 percent versus its peak.
Crude has dropped this week as US stockpiles continue to increase.
The delays demonstrate how a protracted period of sharply lower oil prices could have long-term effects on the production capacity of big Middle Eastern producers and reflect decisions being made across the oil industry as big projects are shelved to cut costs.
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This rise in volume is, however, marginal in the grand scheme of things (hark, below – less than 300,000 bpd), and not to be considered the result of falling USA production.
