High Oil Inventories Leads to US Oil Price Drop

In spite of growing tensions with Iran, US crude oil prices recently decreased due to increased domestic oil stocks.

According to the Energy Information Administration of the United States, crude supplies grew intensely by 4.2 million barrels, its highest rate in one quarter, during the week that ended on the 27th of January. Similarly, gasoline supplies rose to an additional of 3.0 million in the same period. The watchdog attributes this to the extremely weak demand which has been consistently lower by 7.3% to reach its lowest state in recent times.

In the meantime, problems regarding the debt of Europe continue to impact crude prices. The reason for this is that investors are worried about the currency union’s economic development.

However, the tension in Iran gave a certain boost to oil prices and caused a rise in Brent crude. At present, Iran is experiencing more pressure from Europe and the United States which puts its oil inventories at high risk.

Meanwhile, the factory output of China posted a modest expansion during the month of January. The index showed an increase from 50.3 in December to 50.5 in January. The figures went beyond the estimates and gave positive indications to the oil market.

In the New York Mercantile Exchange, March delivery of light, sweet crude declined by 87 cents or 0.88% to end at a per barrel price of $97.61. On the contrary, Brent oil increased by 58 cents or 0.52% to reach a crude oil price per barrel of $111.56 in London.

By: Chris Termeer