Oil prices slipped slightly on Thursday as the rising US dollar cut short a rally earlier this week that boosted crude prices to levels not seen since late 2014. Anadarko photo.
Oil prices dip despite shrinking global crude stocks
The recent rally in oil prices that brought crude back to late 2014 levels halted on Thursday due to a rising US dollar, however, crude futures were underpinned by mounting Middle East tensions and shrinking global crude stocks.
By 2:25 p.m., EDT benchmark Brent was down 27 cents to $71.79/barrel and US WTI was down 6 cents to $66.76/barrel. The Canadian Crude Index fell by 50 cents to $49.48.
“The dollar index is the biggest factor in prices today,” Phillip Streible, analyst at RJO Futures told Reuters. The greenback is up 0.3 per cent against a basket of major currencies, making oil more expensive for buyers using other currencies.
In OPEC’s monthly report, data from the cartel shows the global crude stocks surplus nearly gone due to rising demand and the OPEC supply cut agreement. OPEC says crude stocks in the developed world dropped by 17.4 million barrels in February and now sits at 2.854 billion barrels, about 43 million barrels over the latest five-year average.
According to the report, OPEC is producing less than it had targeted in the supply pact. This has resulted in the hefty drawdown of global stocks.
Speaking with Reuters at International Energy Forum in New Delhi this week, OPEC Secretary-General Mohammed Barkindo said that since the beginning of 2017, the oil glut has effectively been reduced by ninety per cent.
“We have seen an accelerated shrinkage of stocks in storage from unparalleled highs of about 400 million barrels to about 43 million above the five-year average,” Barkindo said.
Participants in the deal agreed to cut their collective production by 1.8 million barrels per day and compliance among participants has been high. The agreement is set to expire at the end of this year, however, Saudi Arabia and Russia have both publicly supported a longer-term agreement.
“There is growing confidence that the declaration of cooperation will be extended beyond 2018,” Barkindo told Reuters. “Russia will continue to play a leading role.”
This week, Brent and WTI prices rose to levels not seen since December 2014, mostly due to rising tensions in the Middle East after Saudi Arabia reported it intercepted missiles over the capital city of Riyadh Wednesday.
President Donald Trump also tweeted a warning about military action in Syria Wednesday.
These geopolitical developments overshadowed a report from the US Energy Information Administration that showed crude inventories were up by 3.3 million barrels. As well, the EIA reported that US production hit a record high of 10.53 million barrels per day.