Energy - - Mar 08,2017
On Wednesday, oil dropped further below $56 a barrel after the release of an industry report which revealed a large upsurge in US crude inventories.
The fresh statistics of the industry report has raised oversupply concerns in spite of OPEC output restrictions.
On Tuesday, data from industry group the American Petroleum Institute (API) showcased that, the US crude inventories surged by 11.6 million barrels last week. This has led to oil prices drop well below $56 per barrel, as noted on Wednesday.
If the U.S. Energy Information Administration report confirms API’s data covering inventory rise, then it would be the ninth straight week of escalations. Previously, analysts have forecasted the surge to be somewhere close to 1.9 million-barrel.
Since January 1, a supply cut deal was fixed by the Organization of the Petroleum Exporting Countries along with Russia and other non-members. Despite this action, the U.S. crude supplies have continued to grow which is indeed aggravating the condition of global oversupply.
According to Saudi Energy Minister Khalid al-Falih, the total output trims have crossed the mark of 1.5 million barrels per day. He further added that the current results have outdone the low market expectations.
A likely US interest rate increase next week along with a strong dollar and surging US oil production is causing the oil prices to tackle significant headwinds.
Jeffrey Halley, senior market strategist at Oanda said, "All eyes are on the EIA numbers".
On Tuesday, according to EIA monthly outlook, it expects US crude production in the present year to grow by 330,000 barrels per day. This count is quite large as compared to previous forecasts.
The scares of the rising US inventories have developed speculations that it might extend the supply cut deal which is presently decided till June.