- The prices of Brent and WTI are fluctuating below last week’s highs.
API data suggests that US oil inventories are higher than expected.
OPEC+ has yet to make a decision on the extension of oil production cuts.
Optimism in the market has capped the downward momentum.
The price of crude oil is fluctuating as the market reacts to US inventories. API’s figures are higher than expected. Investors are now focusing their attention on the EIA data scheduled for later today. In addition, the differences within the OPEC+ cartel have increased concerns about a possible increase in supply. WTI is trading at ~$44.34, down from last week’s high of $46.27. Brent is trading at $47.36 in a similar fashion. It reached a high of $49 the previous week.
Crude Oil Prices
U.S. records higher than expected crude oil inventories
The crude oil market is also reacting to the unexpected increase in the volume of crude oil held by US companies. Yesterday, the American Petroleum Institute (API) reported an increase in US crude oil inventories. Last week, stocks rose by 4.146 million barrels.
In the previous week the stored product quantity was higher by 3,8 million barrels. Experts prognosticated that the supplies of the past week will decrease by 2,272 million barrels. The higher than expected number indicates a lower demand; this is a reason for concern for investors who want to trade with oil.
Later today, the Energy Information Administration will release data on U.S. crude oil inventories. Analysts predict that stocks will decrease by 2.358 million barrels. The predicted change is greater than the previous -0.754 million barrels. Investors will also be interested in the amount of crude oil stored in Cushing, WTI’s supply base.
Breakdowns at the OPEC+ meeting heighten concerns about increased crude oil supply
Investors had kept an eye on the OPEC+ meeting scheduled for two days from 30 December. Indeed, sentiment supported the bullish outbreak of Brent and WTI prices above the $45 and $43 mark respectively. Thus, the current disagreements between oil-producing countries have led to a volatility in crude oil prices.
On the one hand, Russia and Saudi Arabia support the extension of production cuts. However, the United Arab Emirates and other members of the cartel disagree. Investors fear that the failure of OPEC+ to extend the oil production cuts will result in crude oil supply exceeding demand.
Hope for high crude oil demand limits price decline
Investors’ hopes for a vaccination against COVID-19 have helped to limit the losses in crude oil prices. Although the U.S. Food and Drug Administration (FDA) has not yet approved Pfizer’s application, the company’s sales plan is underway. On November 27, United Airlines Holdings Inc (NASDAQ: UAL) commenced charter flights from Brussels to Chicago for the transport of Pfizer’s vaccine.
Pfizer has laid the groundwork to ensure rapid distribution of the doses once the regulatory authorities have approved emergency use of the vaccine. Investors are optimistic that the vaccination will start on December 11. Thereafter, the pre-pandemic norm should return and increase demand for crude oil. This optimism has limited the downward dynamic of crude oil prices.
Furthermore, analysts believe that the turmoil within OPEC+ members is short-lived. Michael Lynch, head of Strategic Energy & Economic Research, said: “People believe that this is the same old story. They will argue, but they will eventually come to an agreement, because nobody wants the price to collapse”.