Crude Oil Plunges 1.82% After US Inventory Report

Oil traders got a bearish surprise on Wednesday after a government report showed that inventories of crude oil were once again rising.

Similarly, the oil for delivery in February traded higher by Rs 9 or 0.37 per cent to Rs 2,540 per barrel in 147 lots.

Global shares rose in thin trading on Tuesday as energy stocks recovered from an overnight drop in oil prices and a sell-off in China.

Crude oil futures fell around half a dollar yesterday as the market remained under pressure from slowing demand and high supplies, while forecasts that a cold snap in Europe and the United States would be short-lived also hurt prices.

Front-month US West Texas Intermediate (WTI) crude futures were trading at $37.18 a barrel at 1.40am GMT, down 69c or 1.82% from their last settlement. “We would put that down to most market participants being out of the market at the moment”, he said.

“There is no significant improvement in the prompt fundamentals”, said Olivier Jakob, managing director of PetroMatrix, warning that low traded volumes into the new year made flat prices susceptible to sharp movements.

Oil could draw support, if U.S. Energy Information Administration data later on Wednesday shows a drawdown in U.S. weekly oil stocks.

Oil slid from the highest level in three weeks, snapping the longest run of gains since April as Iran repeated its goal of boosting exports after sanctions on the country are lifted.

USA oil production, meanwhile has remained fairly steady.

Bloomberg News, however, announced that even in the case of decline in U.S. stockpiles there would be supplies more than 120 million barrels above the five-year seasonal average. The global market, he said, can absorb the additional crude if fellow members of the Organization of Petroleum Exporting Countries (OPEC) “respect” their agreed upon levels of exports.

On Monday, leading OPEC producer Saudi Arabia announced plans for spending cuts and non-oil revenue raising methods to manage a record state budget deficit while state-owned oil firm Saudi Aramco pumps away.

Asali also predicted that global demand for crude oil will exceed 94 million barrels per day in 2016, and that the price of oil will not surpass $60 per barrel before 2020.

Both contracts are down by two-thirds since prices started tumbling in June 2014. Distillate supplies usually fall at this time of year as consumers buy more heating oil, but warmer-than-normal weather and a drop in drilling-related diesel consumption has weighed on demand.

The U.S. also imported more oil last week – 7.9 million barrels a day, up from 7.3 million barrels the week earlier.