Inventories of crude in the U.S. rose by 10.3 million barrels in the week ended November 9, the Energy Information Administration said on Thursday. However, the build was offset by draws to product stocks including gasoline and distillate, the Wall Street Journal reported.
Oil prices entered a bear market last week after a combination of factors—including some sanctions relief to select Iranian oil buyers, revisions upward to U.S. output and a weakening outlook for demand growth— fueled fears of excess supply. Earlier this month, the Trump administration announced waivers for eight countries to temporarily continue importing some volumes of Iranian oil, the Journal adds.
“I think both the size and scale of the waivers did take the market by surprise,” said Caroline Bain, an economist at consulting firm Capital Economics, adding that the announcement was a catalyst for the latest price slump.
Analysts are expecting the Organization of the Petroleum Exporting Countries will agree to cut output at their meeting in December to stabilize the market.
The eighth consecutive weekly rise in U.S. crude stocks “highlights the need for OPEC to cut production,” said Commerzbank in a note.
According to CNBC, oil market analysts say that now it appears that President Donald Trump hoodwinked Saudi Arabia, fooling the U.S. ally into pushing the oil market into oversupply and sparking a roughly 25 percent drop in crude prices.
That accomplished Trump’s goal of driving down energy costs for Americans, but left nations dependent on oil income like Saudi Arabia with the prospect of shrinking revenues, CNBC adds.
Analysts say Trump essentially bamboozled the Saudis by threatening for months to implement sanctions against Iran so strictly, its exports would go into free fall. But when the administration’s deadline for oil buyers to quit Iranian oil arrived on November 4, Trump instead dolled out six-month exemptions to some of the country’s biggest customers.
“They got sort of tricked here. The Russians and the Saudis in particular ramped up production, ramped up exports ahead of what was supposed to be severe sanctions on Iran, and when the administration gave the eight waivers to Iran’s largest buyers, it undercut that whole equation,” said John Kilduff, founding partner of energy hedge fund Again Capital.
“So now we’ve tripped into an oversupply situation almost overnight because of the severe reaction by Russia and the Saudis to cover for Iran losses, which never materialized,” Kilduff pointed out.
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