U.S. Commercial Crude Oil Inventories Near 'All-Time High'... Oversupply Concerns Persist Despite Economic Reopening Efforts

[Asia Economy Reporter Naju-seok] Commercial crude oil inventories in the United States are expected to surpass the all-time high level within a few days. As the possibility of resolving the crude oil oversupply diminishes, oil prices continued to show unstable trends.

[Image source=Yonhap News]

On the 7th (local time) at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil for June delivery closed at $23.55 per barrel, down 1.8% ($0.44) from the previous day. On that day, WTI briefly rose 11% during the session to $26.77 per barrel but then turned downward. Recently, oil prices have shown unstable movements with daily fluctuations exceeding 10%.

Looking at the weekly price trend, international oil prices have been rising on expectations of economic activity resuming in the US and Europe, but concerns over structural oversupply had a greater impact. According to the US Energy Information Administration (EIA), as of the 1st of this month, US commercial crude oil inventories were recorded at 533.2 million barrels. This is close to the all-time high inventory of 535.5 million barrels recorded in March 2017. Considering that US commercial crude oil inventories are increasing moment by moment, the all-time high record is expected to be broken within a few days. Last week, US crude oil inventories increased by 4.6 million barrels. US commercial crude oil inventories showed a steep rise, increasing by up to 19.2 million barrels in one week last month. At the beginning of this year, US commercial crude oil inventories were 431 million barrels, meaning inventories have increased by over 100 million barrels in five months.

The expansion of crude oil inventories is a global phenomenon. According to estimates by energy consulting firm Kairos, as of January 6th this year, global commercial crude oil inventories were 2.668 billion barrels. However, as of the 4th of this month, global commercial crude oil inventories increased by 283 million barrels to 2.951 billion barrels. In China, commercial crude oil inventories increased by 76 million barrels compared to the beginning of the year, totaling 873 million barrels.

Generally, when crude oil is oversupplied, oil prices fall and crude oil consumption increases. However, due to measures such as stay-at-home orders to prevent the spread of COVID-19, demand recovery has been sluggish. The decrease in demand has also affected refinery operations; in early March this year, refining capacity reached 16.9 million barrels per day but dropped to about 12.98 million barrels per day at the beginning of this month.

Fortunately, as governments around the world have announced plans to ease lockdown measures one after another, there are forecasts that crude oil demand will recover. Announcements of production cuts by US oil producers are also positive for oil prices. Saudi Arabia announced it will raise crude oil supply prices next month, leading to speculation that crude oil demand may have bottomed out. However, the Wall Street Journal (WSJ), citing experts, assessed that oil prices remain unstable.

This content was produced with the assistance of AI translation services.