Oil prices experienced a second consecutive day of decline on Wednesday following reports of a surge in crude stockpiles in the United States, the world’s largest oil consumer. Additionally, signs emerged suggesting that major oil producers are unlikely to adjust their output policy at an upcoming technical meeting.
Brent Crude Futures: Brent crude futures for May delivery dropped by 0.9%, or 74 cents, to $85.51 a barrel. The more actively traded June contract also declined by 0.8%, or 68 cents, settling at $84.95.
WTI Crude Futures: US West Texas Intermediate (WTI) crude futures for May delivery fell by 0.8%, or 64 cents, to $80.98 a barrel.
Reasons for Decline: The retreat in oil prices this week follows a recent climb to their highest levels since October. Concerns about a potential lack of action by OPEC+ regarding output policy, coupled with a significant increase in US crude inventories, contributed to the downward pressure on prices.
US Crude Inventories: According to market sources citing American Petroleum Institute figures, US crude oil inventories rose by 9.3 million barrels in the week ended March 22. Distillate inventories also saw an increase, while gasoline stocks fell.
OPEC+ Output Policy: OPEC+ is unlikely to make any changes to its oil output policy until a full ministerial gathering scheduled for June. The group will hold an online meeting of its Joint Ministerial Monitoring Committee on April 3 to review market conditions and members’ compliance with output cuts.
Compliance Concerns: Recent reports suggest that some OPEC+ members, including Iraq, have exceeded their production quotas. This has raised questions about the group’s ability to adhere to output targets.
Market Reaction: Traders are closely monitoring OPEC+ members for any signs of altering their stance on production quotas. The uncertainty surrounding output levels and compliance has added to the downward pressure on oil prices.
Overall, the combination of increased US crude inventories and uncertainties surrounding OPEC+ output policies has led to a continuation of the recent decline in oil prices, despite their earlier rally in mid-March.