April 3 (UPI) — After posting steep declines in the previous session, crude oil prices moved higher in Tuesday trading on signs the U.S. market surplus has evaporated.
Crude oil prices dropped below $30 per barrel in early 2016 as U.S. oil production accelerated and members of the Organization of Petroleum Exporting Countries defended their market share with more output of their own. OPEC is now in its second year of an effort to drain the market surplus with coordinated production and, while U.S. rates are accelerating, the country is exporting more of its crude oil to the open market.
A survey of analysts from commodity pricing group S&P Global Platts revealed expectations of a build in U.S. crude oil inventories of 575,000 barrels last week, compared with the five-year average of 1.7 million barrels.
“Inventories have risen seven of the last nine weeks through March 23 by 18.3 million barrels, which is smaller than normal for this time of year,” Oil Futures Editor Geoffrey Craig said in a report emailed to UPI. “As a result, crude stocks now sit 1.5 percent below the five-year average, versus a surplus of 3.9 percent nine weeks ago.”
After shedding more than 2 percent in Monday trading, crude oil prices were rebounding ahead of the opening bell in New York. Brent crude oil was up 0.25 percent as of 9:16 a.m. EST to $67.81 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.35 percent to $63.23 per barrel.
Craig said U.S. oil production could spoil the rally, however. At 10.4 million barrels per day for the week ending March 23, U.S. production is at its highest since at least the early 1980s. By some estimates, U.S. oil production increased continually for the last year and half.
Crude oil prices had rallied through March on the back of heightened geopolitical risk. OPEC-member Venezuela is producing at a record low, while Iran, one of the group’s top producers, is facing increasing pressure from Washington and Saudi Arabia.
Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI that risk is more or less priced in at this point and traders are turning their attention to the stock markets.
The Dow Jones Industrial Average fell more than 450 points Monday as tech stocks dropped and a potential trade war between the United States and China loomed over the market. Dow futures point to a rebound on Tuesday.