The oil prices were seen considerably crashing down this Thursday after the significant rise of U.S crude inventories and abundance of supplies, regardless of cutting any outputs from OPEC (Organization of the Petroleum Exporting Countries) and other producers.
It was last recorded that the U.S West Texas Intermediate (WTI) crude oil futures were trading at $52.18 per barrel at GMT 0141, and they went down 7 cents after their last settlement.
Even the prices for Brent crude futures, the global benchmark for all oil prices recorded a dip of 4 cents; they were earlier trading at $55.06 per barrel.
The dip in oil prices was mainly due to a report published by the U.S Energy Information Administration late Wednesday. The ongoing oversupply of inventories in U.S unexpectedly reached 483.11 million barrels from a mere 4.1 million barrels, as said by traders.
The record U.S refinery runs an estimated 17.1 million Barrels Per Day (BPD), increased up to 418,000 bpd this week, preventing the price from falling and indirectly indicating that the demand for per-day usage is more.
The executives at ANZ bank said, “EIA data showed U.S. refineries increased the amount of crude they processed, pushing the utilization rate to the highest since September. This saw inventories rise … much more than the market expected.”
Outside the U.S, the demand for Saudi was cut-short through the efforts of OPEC and other top producers like Russia to control the global supply excess demands.
Even with huge supply reductions to India, Malaysia, and China for the month of Feb, the top crude exporter Saudi Arabia is more likely to focus more cuts in Europe and the United States, thereby shielding its biggest markets in Asia.
The research firm, BMI research said that the total cut by OPEC and other oil production seems to be genuine and that they calculated the compliance cut to be around 73%.
The firm also said that the planned cuts were mostly compliant by members of the Gulf Cooperation Council of Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman.
The expert analysts noted that the major thing, which went unnoticed under production cut, is that producers have complied to cut the output, but not the exports.
BMI also said, “The GCC countries (and Iraq) that have reportedly enacted the bulk of the production cuts are currently in the lowest domestic demand period of the year and have significant flexibility to reduce production but maintain exports.”
There are still plenty of supplies available in spite of the cuts; traders are using this opportunity of higher crude price following OPEC and other producers to cut output in sending record volumes of surplus European and Azerbaijani oil, amounting to around 22 million barrels to Asia.