Will Oil Rise to 74 US Dollars
The global crude oil inventory is accelerating to decline, the oil will rise to 74 US dollars?
Media reported that the large amount of crude oil inventories accumulated during the epidemic are now running out. This has rescued oil producers, but consumers will suffer because oil prices may rise.
The International Energy Agency (IEA) stated that due to the decline in demand for crude oil last year, a large amount of oil remained in advanced economies. But as of February this year, only one-fifth of these excess inventories remained.As OPEC and its allies cut production on a large scale, the economic recovery is boosting global fuel demand. This has pushed international oil prices to nearly US$67/barrel, which is good news for producers, but it has brought a lot of worries to motorists and the government.
Analysis said that as OPEC started to resume some of its suspended production and new rounds of epidemics in India and Brazil have suppressed demand, it will take some time for the global excess crude oil inventory to be exhausted.
IEA estimates that as of February, crude oil inventories in advanced economies were only 57 million barrels higher than the five-year (2015-2019) average, which was far below the peak of 249 million barrels in July last year
A year ago, global blockade measures reduced crude oil demand by 20%, and the trading giant Gunvor Group Ltd. was also worried that oil storage space would soon be exhausted. But today, the situation is completely different.The backlog of oil stocks in the United States has actually been consumed.
The U.S. Energy Information Administration (EIA) stated that the total inventory of crude oil and refined oil products fell to 1.28 billion barrels at the end of February, the lowest level since the outbreak, and has been maintained at this level since then. Last week, crude oil inventories on the East Coast of the United States fell to their lowest level in at least 30 years.
Oil inventories on offshore tankers are also decreasing. IHS Markit said that last year, oil tankers were temporarily used as floating warehouses due to increasingly scarce onshore oil storage facilities, but now the oil inventories on tankers have fallen sharply.
Media data show that the hub’s inventory will drop to 24.5 million barrels, the lowest level in a year.
For the OPEC+ alliance headed by Saudi Arabia and Russia, the decline in crude oil inventories proves that the bold strategy they adopted a year ago is correct. In April last year, OPEC+ cut its daily output of crude oil by 10 million barrels, which accounted for about 10% of global supply. It is now cautiously restoring some of the suspended crude oil.
OPEC has always stated that its main goal is to reduce the huge oil stocks to normal levels, but it is not clear whether the organization will increase production again once the goal is reached. In the past, the temptation of soaring oil prices caused the organization to tighten production even after achieving inventory targets.
For oil-consuming countries, a substantial reduction in oil inventories is not a good thing. According to data from the American Automobile Association (AAA), California gasoline prices have risen to nearly $4 per gallon. As a major oil importer, India is also complaining that rising oil prices have put pressure on its finances.
According to experts “U.S. gasoline sales are rising sharply. Driven by the demand for transportation fuels and petrochemical raw materials, demand for all refined oil products will reach record levels in the third quarter.”