Oil Drops as U.S. Inventories Surpass Half a Billion Barrels
Oil’s 2021 rally hit a wall after U.S. inventories increased and an announcement by the International Energy Agency said that oil supplies are abundant.
West Texas Intermediate declined for five consecutive days, leading the U.S. benchmark towards the longest losing streak in longer than a year. Brent also retreated in London as traders evaluated global supply risks in relation to an uneven consumption recovery even with the global pandemic retracting.
Consumption is increasing in some parts of the world while parts of Europe are having difficulties in recovering. In addition, the demand in Asia and China is dwindling. April and May oil cargoes loaded from the Middle East and Russia to be sent to Asian refiners have declined.
The dip in oil prices comes despite the OPEC+ decision to continue its output cuts and the vaccine positive outlook on the pandemic. The group is slated to meet on April 1 again to discuss oil supply levels for May. The IEA (International Energy Agency) mentioned in a report that OPEC and its allies could turn to extra capacity to stop the rally and estimated that oil demand will not return to its pre-pandemic levels until 2021.
After the February deep freeze and extended outages, the U.S. shale output recovered faster than expected resulting in crude stockpiles increasing by 2.4 million barrels to surpass half a billion barrels, the highest point since December.
Investors are watching closely a meeting between top U.S. and Chinese officials in Alaska, starting today, Thursday. People familiar with the situation reported that a successful first session could lead to another meeting between U.S. President Joe Biden and his Chinese counterpart, Xi Jinping.
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