Crude oil prices were seen trading weaker this week amid conflicting reports that hit the market sentiment. The weekly U.S. crude oil inventories report showed another weekly build-up in stockpiles.
The U.S. Energy Information Administration (EIA) reported that the weekly build-up in crude oil stockpiles rose 1.6 million barrels for the week ending March 23. The report came amid data from the American Petroleum Institute (API) which reported a 5.23 million build up in crude oil stockpiles.
The EIA said that refineries processed 16.8 million bdp of crude oil during the reporting period which was unchanged from the previous week. Gasoline production was seen averaging around 10.3 million bpd compared to 9.9 million bdp from the previous week.
EIA’s report showed a draw down in the gasoline inventories which fell by 3.5 million barrels for the week ending March 23.
Oil market speculators have been closely monitoring the data points pertaining to crude oil inventories as well as developments in the international oil markets. In a report that came out last week, speculation was high that oil prices could rise strongly this year on account of supply disruptions and OPEC deal to limit crude oil production.
A survey conducted by Reuters last week showed that Brent crude oil would average around $64 a barrel in 2018, slightly higher from the survey released in February. However the average is expected to be around $67.18 in 2018.
The Light Sweet Crude Oil is expected to average around $59.8 in 2018, slightly higher from the previous forecasts in February.
For the moment, OPEC has committed to curbing oil output by 1.8 million barrels per day through 2018. This also includes the participation of Russia which has managed to help OPEC members to stick through the deal.
However, questions still remain on whether OPEC will extend the deal when it meets later in November this year. Russia is seen as an integral part to the OPEC’s deal of limiting crude oil output. According to some reports Russia and Saudi Arabia are in initial talks about creating a long term deal that could extend controls on the crude oil supplies.
OPEC announced last week that it was planning to extend its cooperation with Russia over the next ten to twenty years and sparked speculation that perhaps OPEC members will indeed extend the oil output cuts at the next meeting.
Meanwhile, the higher crude oil prices have boosted the U.S. shale oil industry to start scaling their operations.
Analysts expect that crude oil production in the U.S. could rise by at least one million barrels per day this year. At the time of writing, the U.S. oil output stands at 10.4 million barrels per day and is seen matching the oil output from Saudi Arabia.
The EIA had said earlier this month that global oil demand would rise by 6.9 million bpd by 2023 to 104.7 million bpd. Most of the increase in the demand side is expected to come from Asia.
The current speculation in the oil market comes at a time when key analysts note that the Big Oil was entering its Golden Age marked by a phase of backwardation, cost deflation and consolidation in the markets.
The bullish mood was also seen buoyed by continued tensions in the Middle East and the potential impact of the U.S. reintroducing sanctions on Iran.