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Oil drops on US stockpile increase despite tight market

Oil drops on US stockpile increase despite tight market

Mubasher: Oil prices declined on Wednesday after industry figures showed a buildup in US crude stockpiles, while Saudi Arabia pledged to keep the market on an even keel, Reuters reported.

Nevertheless, crude futures remained tight amid supply restraints led by the Organization of the Petroleum Exporting Countries (OPEC) and as political tensions escalated in the Middle East.

At 7:18 am GMT, US Nymex crude futures dropped by 1.08% to $62.45 per barrel, while international benchmark Brent futures fell by 0.71% to $71.67 pb.

US oil inventories climbed by 2.4 million barrels last week to 480.2 million barrels, the American Petroleum Institute (API) said on Tuesday.

It is worth noting that the official report regarding oil stockpiles is due to be released later in the day.

In addition, Saudi Arabia on Wednesday stated that it was committed to a balanced and sustainable oil market.

Saudi Arabia has been in the lead of the supply curbs by OPEC and its allies which have been in effect since last January and came with the aim to clear a market glut and shore up prices.

Crude supply from the so-called OPEC+ alliance dropped by 2.3 million barrels per day (bpd) between November 2018 and April 2019, owing to the cuts, Bank of America Merrill Lynch (BAML) was cited by Reuters.

Meanwhile, the impact of the curbs is kept in check by a slower momentum of global crude demand growth to just 700,000 bpd in the fourth quarter of last year and the first quarter of this year, amidst mounting trade tensions, BAML said.

However, market participants are eying the escalating tensions between the US and Iran, as President Donald Trump on Monday threatened Iran with “great force” in the event of attacking the US interests in the region.

US Defense Secretary Patrick Shanahan stated that threats from Iran remained high.