Oil pulls back from multi-year high after US oil stocks surge
Oil prices fell nearly 2% on Wednesday. Oil has pulled back from several-year highs and market is calmed down after recent drastic gains driven by an unexpected surge in US crude inventories.
The U.S. Department of Energy said U.S. crude inventories increased by 2.3 million barrels last week against expectations for a modest decline of 418,000 barrels. Gasoline stocks also rose, while distillate stocks fell only ineffectively.
Brent crude, which reached $83.47 per barrel and its highest level since October 2018, was down $1.48, or 1.8%, to settle at $81.08 per barrel.
West texas Intermediate (WTI) crude fell $1.50, or 1.9%, to $77.43 a barrel. WTI had climbed to $79.78, the highest level since November 2014.
The price of the global benchmark Brent has risen more than 50% this year, adding to the inflationary pressure that could slow the recovery from the COVID-19 pandemic. Natural gas reached a record high in Europe, and coal prices from major exporters hit all-time highs.
On Monday, OPEC, Russia and other allies chose to stick with the plan to gradually increase production and did not increase it further, as the United States and other consumer countries insisted.
The recent rise in crude oil prices has been fueled by the Organization of the Petroleum Exporting Countries and its allies' refusal to increase production and concerns about tight energy supplies globally. A satisfactory return was achieved thanks to the significantly increased prices.
The market tumbled modestly later in the day after US Energy Secretary Jennifer Granholm suggested the possibility of tackling high prices by extracting oil from US strategic reserves or potentially halting crude oil exports.
The US ended its 40-year ban on crude oil exports in late 2015 and now ships more than 3 million barrels per day of crude oil. It is not thought that it has come to the point of limiting crude oil or natural gas exports.
U.S. crude and gasoline inventories rose unexpectedly last week, with U.S. crude production returning to pre-storm levels. The production rose to 11.3 million barrels per day, recovering from storm shutdowns more than a month ago, near the highest levels during the pandemic, but still far from the record 13 million barrels set in 2019.
U.S. production has been far from offsetting the OPEC+ cuts as shale companies restrict drilling by focusing on investor returns. With the decision taken by OPEC and its allies, including Russia, the cost of imported oil increased for US.
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