The price of oil has been steadily increasing over the past couple of months. Back in February, U.S. crude-oil futures posted their highest close in over three months, and recently prices have now surpassed a 4-month high.
While the overall trend that’s been pushing prices higher comes from the reduced output from OPEC countries and their allies, on a more short-term, day-to-day basis these prices fluctuate largely based on new information related to the U.S.’s domestic supplies and output. Today saw further information come out indicating America’s stockpiles were lower than expected.
Brent crude, the U.S. benchmark, increased 88 cents or 1.3 percent to $67.55 a barrel, while West Texas Intermediate crude ended today at $58.26 a barrel, rising 2.4 percent. For both benchmarks, these are prices that haven’t been seen since mid-November.
This increase in price was mainly attributed to an announcement from the Energy Information Administration on Wednesday, reporting that U.S. crude supplies fell by around 3.9 million barrels last week. This was a good deal higher than what the 3.3 million barrels expected by analysts that were polled recently. Additionally, the American Petroleum Institute went on to say on Tuesday that there had been a 2.6-million-barrel decline, so the markets were surprised when the EIA reported a significantly higher figure.
“Stymied net imports and refinery runs clambering above the 16 million barrel-per-day mark has been enough to yield a second draw to crude inventories in three weeks,” commented Matt Smith, director of commodity research at ClipperData. “Gasoline inventories drew strongly, now down more than 12 million barrels—or 5%—in four weeks, while distillate inventories ticked higher as implied demand slipped last week.”
Traders have been weighed by the prospect of record U.S. shale production, with markets reacting often in direct correlation to any new news on the nation’s output and expectations. However, the EIA ended up slightly lowering its expectations for domestic output in 2019, forecasting that production will average 12.3 million barrels a day in 2019, a slight decrease from the 12.4 million barrels a day estimate it made previously. The agency also slightly reduced it’s 2020 predictions, bringing it’s forecast down from 13.2 million barrels a day down to 13 million.
A previous report from the International Energy Agency (IEA) went on to predict that the U.S. would lead the world’s growth in oil output. “The second wave of the U.S. shale revolution is coming,” added Fatih Birol, the IEA’s executive director in a press release recently. “It will see the United States account for 70 percent of the rise in global oil production and some 75 percent of the expansion in [liquefied natural gas] trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”
The next couple of days will be much anticipated by commodity and futures traders. Thursday will see a new monthly oil report from OPEC get released, and the IEA is expected to publish a report this Friday. Other factors that have been influencing oil prices include the current blackout in Venezuala alongside the state of the ongoing trade talks between Washington and Beijing.