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Oil prices experienced a second consecutive day of decline on Wednesday, as concerns over increasing crude inventories in the United States and uncertainties regarding production policy among major producers weighed on market sentiment. Here are the key highlights from today’s oil market movements:
Brent crude futures for May delivery fell by 0.9 percent to $85.51 a barrel, while the June contract dropped by 0.8 percent to $84.95. Similarly, US West Texas Intermediate (WTI) crude futures for May delivery declined by 0.8 percent to $80.98 per barrel. The downward trend follows last week’s surge to the highest levels since October, with prices currently hovering around three percent above the early March average closing price.
]The recent downturn in oil prices was attributed to several factors. Firstly, a significant increase in US crude inventories, coupled with expectations that the OPEC+ alliance may maintain its current production policy, contributed to the bearish sentiment. US crude oil inventories reportedly rose by 9.3 million barrels in the week ending March 22, with distillate stocks also witnessing a modest increase. However, gasoline stocks recorded a decline, offering some offsetting support.
OPEC+ Production Policy Uncertainty
Ahead of the technical meeting scheduled for next week, three OPEC+ sources indicated that the group is unlikely to make any changes to its production policy until a full ministerial meeting in June. This cautious approach comes amidst ongoing discussions within the alliance regarding compliance with production cuts. Earlier this month, OPEC+ members agreed to extend production cuts by approximately 2.2 million barrels per day until the end of June. However, concerns have emerged regarding certain members’ ability to adhere to the agreed-upon targets.
Recent reports suggest that Russia has instructed companies to reduce production to meet the designated targets, while the Iraqi Oil Ministry announced plans to curtail exports to address production quota breaches. However, questions remain regarding overall compliance levels within OPEC and the broader OPEC+ alliance. In February, OPEC exceeded its targets by 190,000 barrels per day, with Iraq among the countries surpassing their quota limits.
As the market awaits official government data on US inventories and monitors developments within the OPEC+ alliance, volatility in oil prices is expected to persist. Investors will closely analyze upcoming meetings and announcements for insights into future production dynamics and their implications for global oil markets.
