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Oil Prices Slide amid Smaller-than-Expected US Supply Build, Bearish IEA Report

Crude oil futures are in store for a raucous trading session midweek after the US government reported a smaller-than-expected build in domestic inventories. International energy markets also combed through the latest global industry report that forecast conditions will not normalize for another two years, citing ample supplies and lackluster demand. Has this shut the door on a possible oil supercycle?

April West Texas Intermediate (WTI) crude oil futures tumbled $0.55, or 0.85%, to $64.25 per barrel at 14:40 GMT on Wednesday on the New York Mercantile Exchange. US crude has hit the pause button its meteoric ascent in 2021, sliding 0.4% over the last week. Year-to-date, WTI prices are up 33%.

Brent, the international benchmark for oil prices, is also slumping in the middle of the trading week. May Brent crude futures fell $0.65, or 0.95%, to $67.74 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), domestic stockpiles of crude oil increased 2.396 million barrels in the week ending March 12. This is lower than the median estimate of 2.964 million barrels. Last week, US inventories soared close to 14 million barrels.

Supplies at the Cushing, Oklahoma storage facility tumbled 624,000 barrels. Distillate inventories advanced 255,000 barrels, while gasoline stocks rose 472,000 barrels.

The International Energy Agency (IEA) released its annual Oil 2021 report, looking at the state of the energy market through 2026. The part that is grabbing international headlines is that the IEA does not think crude oil demand will return to pre-pandemic levels until 2023, triggering a modest selloff for an energy commodity that has skyrocketed more than 90% over the last 12 months.

The IEA noted that an oil supercycle, with prices potentially reaching $100 a barrel for an extended period, is unlikely to happen. Report authors stated that global inventories are immense and that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, possess more than nine million barrels per day (bpd) of spare output capacity offline due to the cuts.

According to the Paris-based agency, global crude demand will top 104 million bpd by 2026, up by 4.4 million bpd compared to 2019 levels.

Global energy markets are monitoring the vaccine rollout situation in Europe. Over the last week, several European countries have suspended the use of AstraZeneca’s coronavirus vaccine amid concerns of possible lethal side effects, including blood clots. This comes as multiple nations have seen rising COVID-19 cases, and others impose new lockdown measures. Investors are worried this would have a broader impact on oil prices.

A higher greenback weighed on crude oil ahead of the Federal Reserve’s March Federal Open Market Committee (FOMC) policy meeting. The US Dollar Index (DXY) edged up 0.07% to 91.93. A stronger buck is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase. Year-to-date, the DXY has rallied 2.2%.

In other energy markets, April natural gas futures dropped $0.029, or 1.12%, to $2.568 per million British thermal units (btu). April gasoline futures plunged $0.0319, or 1.52%, to $2.0693 a gallon. April heating oil futures shed $0.0102, or 0.53%, to $1.9225 per gallon.

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© AndrewMoran for Commodity News, 2021. | Permalink | No comment |
Published under: Oil

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