GLOBAL – US oil producers are threatening to reverse the gains that have so far been made in improving the price of crude oil in the international market.
According to report by Punch Nigeria Oil prices dropped by 1.2 percent in July after data from the United States government showed a surprise rise in the country’s crude inventories.
Reuters reported that the international oil benchmark, Brent crude, fell 55 cents, or 1.2 per cent, to $43.77 per in July while the U.S. West Texas Intermediate crude dropped 56 cents, or 1.3 per cent, to $41.36.
The Energy Information Administration noted that US crude and distillate inventories rose unexpectedly and fuel demand slipped in late July due to a surprise surge in COVID-19 cases in the North American country.
According to Energy Information Administration, Crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels as production in the US rose to 11.1 million bpd.
The rise according to Reuters was against an industry expectation of a 2.1 million-barrel drop in crude oil inventories in the United States.
“Overall this would suggest that the demand recovery we’ve seen from the bottom seems to be stalling,” said Phil Flynn, senior analyst at Price Futures group in Chicago.
The oil prices have been hurt by a twin crisis of a protracted price war between Russia and Saudi Arabia who are the major producers of the commodity and a raging COVID19 pandemic that has led to the shut down of major economies and travel routes.
Despite the twin crisis, oil producers continued to pump crude from their wells, causing a catastrophic imbalance between oversupplied oil and the biggest slump in demand for 25 years.
The net result was a drop in oil prices which fell below the US$40 mark for the first time in 20 years.
A series of talks between OPEC countries and Russia brought hope to price appreciation and stabilization.
The OPEC+ summit held last month resulted in commitments by OPEC nations and their partners to cut oil productions by 9.4 million barrels per day.
This pushed oil prices above the US$40 mark for the first time since the crises and there were hopes for a further rise in prices as demand for the product improved.
The hope for further rise in oil prices is now on the balance as US oil producers continue to ramp up production and the trade war between Washington and Beijing continues to drag on.
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