As markets around the world fear a banking system collapse, oil prices have come under significant pressure in recent days with WTI crude, the US benchmark, falling below $67 on Wednesday, its lowest since November 2021. Low Price.
On Wednesday, WTI fell nearly 7% to $66.47 a barrel. As recently as March 6, WTI traded north of $80. International benchmark Brent crude oil was trading at a low of $72.60 per barrel on Wednesday.
Oil prices declined this week as the latest data on U.S. oil stockpiles hit what Carolyn Bain, chief commodities economist at Capital Economics, called a “lack of domestic demand” in a note to clients on Wednesday.
Tuesday’s data from the American Petroleum Institute showed inventories rose for the 10th-straight week for the week ended March 10, while the Energy Information Administration’s weekly Petroleum report revealed on Wednesday Crude stockpiles increased last week, noting that inventories are running 7% above their five-year average.
Bain pointed to the Biden administration’s decision on Monday to approve a massive drilling project in Alaska as a sign more supply could be coming to a market not already facing an oil shortage. Is.
“The approval was for a scaled-back project and will still face legal challenges, but it is significant because President Biden has broken his campaign promise to ban all drilling on federal lands,” Bain wrote. ” “when fully operational at 180,000 [barrels per day]This would mean a 40% increase in Alaska’s oil production to approximately 620,000 bpd.”
The latest drop in oil also has some echoes of the panic seen in the oil markets in the spring of 2020.
Oil was sold aggressively in the spring as the pandemic-induced global recession worsened the demand picture. But the rapid drop in the price of oil eventually created a real-world storage mismatch, resulting in WTI is falling to negative $40 a barrel As traders worked to avoid taking forced deliveries of oil they could not store.
A rise in the dollar also put pressure on oil prices on Wednesday. The dollar saw fairly muted trading amid early fallout from the Silicon Valley bank failure, but strengthened largely on Wednesday as Credit Suisse’s latest struggles triggered growing fears about the global fallout from recent US bank failures. Did.
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