The US crude inventories are up for the straight seventh week, showing that the struggle of the markets is still on to ease the oversupply pressure, although the producers are doing their bit of reining in the production. The EIA (Energy Information Administration) said that the stocks of US crude rose by 564,000 barrels in the week till 17th February. Though there was an increase in the stocks, it was below the analysts’ expectations of 3.5 million barrels.
The OPEC (Organization of the Petroleum Exporting Countries) and some other producers have decided to cut output to tame the decreasing prices of crude. They had reached a production-reduction deal last year through a joint compliance. This led to a figure of 88% in January as stated by OPEC sources through a technical committee meeting.
All producers had to meet the personal targets, but UAE and Iraq have been laggards so far. They have now pledged to meet their targets in the coming months.
As the United States is not a party to this deal, there is a continuous rise in the US inventories. On Monday, in the early session, the oil prices edged higher a bit as excess global supply starting easing out, but because of the US, the gains were limited. The analysts feel that the US output will, in fact, increase if the oil prices remain strong.
Brent crude oil LCOc1 was up by 0.2 percent to touch $56.09 a barrel; the U.S. West Texas Intermediate CLc1, on the other hand, could add only 0.1 percent to touch $54.04 a barrel.
Though the oil inventories are on a rise, ANZ said – “EIA data showed that though stocks rose 564,000 barrels to 518.7 million last week, it was the lowest increase over the past couple of months. If this trend of lower imports and smaller gains in inventories persists over the coming weeks, it would suggest that the OPEC-led production cuts are starting to have an impact.”
The market feels that the current prices at which the oil is trading are not sustainable for either the OPEC or the industry. This simply means that more efforts have to be made in curtailing the production so that the supply falls leading to the rise in demand and hence the price.
Most of the market participants feel that while OPEC is doing its bit, it’s the comeback of shale in the US that is playing the spoilsport.