Spiraling Crude Oil Situation

Market Trends - 19/11/2015

Rapidly increasing stockpiles of crude oil are a theme within the industry today, and this trend does not indicate abatement any time soon, according to recent reports. The latest figures released by the International Energy Agency have global inventory reaching 3 billion barrels of crude, a number that weighs on the supply and demand equation and pressures the price of the commodity ever lower. In the US, despite statistics showing inventory buildup coming in almost 1.750 million barrels short of expectations, the trend is the same. The sky high storage numbers in the country show stockpiles at nearly year-long highs at 487.30 million barrels, just under April’s 490.90 million. The nation’s foremost storage facility in Cushing, OK recently received a deposit of 1.50 million barrels that has inventory 100 million above seasonal averages. Depots in European territory are also reportedly reaching capacity, as seasonal demand lies with alternative fuels like diesel and heating oil. Though late-year usually brings with it stockpile declines in developed nations, recent news illustrates a 13.80 million barrel surplus.

Naturally, the price of crude oil is orienting itself downwards as output from several major economies vastly exceeds current demand. Saudi Arabia and other OPEC constituents, Russia, the United States and Iran are currently pumping more oil than necessary, with the latter trying to elevate production to make up for recently lifted sanctions. Widely anticipated interest rate hikes in the United States make for a strong dollar and higher rates for traded commodities, pushing prices upwards for buyers abroad. The robust dollar and steady overproduction of oil combined with an OPEC that refuses to acquiesce and continues to use brute force tactics to win the price war, means cheap oil will not ebb until the end of 2016 at least. The larger producers and governments participating in the race that have proven lean enough to persist remain indifferent to conditions, further lengthening the forecast.

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