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The American Petroleum Institute has announced that crude oil stocks rose to 1.5 million barrels, well above forecast of only 900,000 barrels. This hasn’t affected oil prices as OPEC is cutting output.
In fact, currently traders in China and Europe are sending a record 22 millions barrels from Azerbaijan and the North Sea to meet the expectations of a supply gap resulting from cuts in production, according to Investing.com report. Traders bet that Asia needs oil and Europe has it. At present, there’s a contango in the futures market. This means that later months are priced higher, so traders can lock profits and ship oil long distance.
In December, OPEC nations decided to cut output by 1.2 million barrels per day (bpd) in the first half of this year. Presently, ships carrying oil to Asia are loaded with 11 million barrels of crude, higher than a record last December when 10 million barrels were shipped.
Rising oil prices are bound to benefit the U.S. shale oil drillers. The United States Energy Information Administration expects that crude production in America will rise by 300,000 bpd in 2018 in comparison to this year. It expects the production to be 9.3 million bpd then, which at the same same may keep oil from rising further. Unless OPEC acts.
Iran is also pumping up its oil production after decades of embargoes, and that will add to the supply. What’s more, some OPEC nations are experiencing financial woes, which may lead to cheating.
It is also expected that oil demand in the United States will increase to 20.22 million bpd, a 370,000 bpd increase. SO far the signals are bit confusing and point to a possibility of oil going in either direction. At this point, oil prices have stabilized.