According to the news report by Bloomberg, after a short respite, the downward slide of the price of crude oil started once again after news broke that there had been an unexpected large increase in American crude oil inventories. This led to added concerns about a global supply glut just before the meeting between two of the world’s biggest oil producers, Russia and Saudi Arabia.
The West Texas Intermediate futures dropped by 2.5% in trading in New York after the report by the US Energy Information Administration that revealed that American oil supplies had gone up for the 10th week in a row. This increase in the country’s oil inventory was fed by increasing oil imports.
Traders, however, are still focused on the expected meeting at the G20 Summit in Buenos Aires, Argentina between Saudi Arabian Crown Prince Mohammed bin Salman and Russian President Vladimir Putin.
The other meeting that is key to the oil markets will be the meeting between OPEC members and their allies which is scheduled to take place in Vienna, Austria next week. The cartel is looking to stabilize global oil prices that have fallen over 30% since last month. To this end, the group will be contemplating cutting oil output by 1 million barrels of oil per day.
John Hancock Financial Services’ Adam Wise, a strategist who takes care of a $9 billion oil and gas portfolio, stated that everyone was now looking towards the OPEC meeting next week to get a sense of which direction oil prices were going to take. Wise stated that that would depend on the severity of cuts adopted by OPEC and its allies.
The American benchmark for crude, the West Texas Intermediate futures for January fell by $1.27 in yesterday’s trading to $50.29 per barrel on the New York Mercantile Exchange. The WTI’s 14-day Relative Strength Index is still in oversold territory.
The international benchmark for crude, Brent futures that expire in January were down by 2.4% to trade at a price of $58.76 per barrel on the ICE Futures Europe Exchange in London.
Saudi Arabian Energy Minister Khalid Al-Falih and Nigerian Energy Minister Emmanuel Ibe Kachikwu told the press in Abuja that there were confident that OPEC and its allies would succeed in stabilizing crude oil prices. However, the Saudi Arabian minister was less confident than previously, and he did not specify an actual cut in oil production.
Adding to the uncertainty in the oil markets were President Vladimir Putin’s comments. He stated that the current Brent crude oil prices of about $60 per barrel were okay for his country. This is stark contrast to his statement two weeks ago, when Putin had said that Russia would be okay with a $70 per barrel price.
While gasoline supplies in the US unexpectedly fell last week, which led to slight gains in oil prices, they were not enough to overcome the pessimism of the news of an oil supply increase in the country. Gasoline futures prices dropped by 1.6% to trade at $1.3979 per gallon.
According to the US Energy Information Administration’s report, country-wide oil supplies had jumped up by 3.58 million barrels in the previous week. Analysts had predicted that inventories would go up by only 1 million barrels.
A director with Tortoise, Nick Holmes, who manages a portfolio in energy that is over $16 billion, this report shows an increased build in relation to the market consensus on crude stockpiles in the US. The expectation had been that as maintenance in refineries began to wind down for the year, the market would see more draws.