Crude Oil Rallies After API Shocker

Crude Oil Rallies After API Shocker

On Wednesday, the U.S. Energy Information Administration said crude inventories C-STK-T-EIA fell nearly 5 million barrels to 419.5 million barrels last week.

At 419.5 million barrels, US crude oil inventories are in the middle of the average range for this time of year.

Oil's rally shows that the Organisation of Petroleum Exporting Countries and its allies are succeeding in clearing the glut triggered by the growth of USA shale oil.

Brent crude jumped high when OPEC announced its decision to continue the limited supply of oil.

"Pretty much all of the fundamental boxes are supportive of the current rally and a bit more", said Paul Horsnell, head of commodities research at Standard Chartered in London.

Brent crude futures rose 61 cents to settle at $69.87 a barrel. A forecast made in 2011 by the International Energy Agency suggested that US shale oil production will peak around 2020 at around 1.4 million barrels a day and then gradually decline.

So far this year, the crude market has risen every day but two, helping increase the S&P 500 energy index about 6 percent over that span.

Whereas past year Exxon and Chevron have invested in U.S. shale oil, seeking to benefit from the relatively low development cost and the short time it takes to extract commercial oil.

While these seem like muted responses to another remarkable day in trading, other experts were more explicit in stating their misgivings about the high prices: specifically, Stephen Innes, head of trading for Asia/Pacific at Oanda, argued that the fuel market has overheated: "Markets are getting a bit worn out, and a healthy correction could be on the cards".


Iranian Oil Minister Bijan Zangeneh said Tuesday that prices this year were supported in part by OPEC commitments, but also by demand strains from severe winter weather.

Oil is extending gains after a second yearly advance as the Organization of Petroleum Exporting Countries and its allies trim supply to reduce a global inventory overhang.

Crude exports from OPEC's Persian Gulf members last month dropped below 18 million barrels a day for the first time since August, tanker-tracking data compiled by Bloomberg show.

OPEC's aim is to ensure the stabilisation of oil markets.

The RAC said rise in oil price will lead to increase in the price of motors too.

What's the Fair Price of Crude Oil Today?

Production cuts, led by the Organization of the Petroleum Exporting Countries and Russian Federation, which are set to continue throughout 2018, have underpinned prices.

The continued drop in USA crude oil inventories comes as the United States continues to ramp up production, hitting the second highest production level of 2017 in the last week of December of 9.782 million bpd. The oil price bottomed out in early 2016 at $26 a barrel leading to national average pump prices of 101.65p a litre for unleaded and 100.78p for diesel. GasBuddy also released a forecast for 2018 last week that predicted gas prices will be at their highest levels since 2014. OPEC in December, however, produced about 50,000 barrels per day more than in November.

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