Crude Oil Prices Reached its Lowest Level in Six Weeks at $97 per Barrel

For the first time, crude oil prices decreased to its lowest level in six weeks as it reached below $97 since the 19th of December. The decline is attributed to low demand and increasing oil inventories.

March delivery of light, sweet crude oil prices fell by 1.3% or $1.25 to end at $96.36 per barrel in the New York Mercantile Exchange. In the past five sessions, the contract has declined by 3.4%.

Houston’s IAF Energy Advisors managing partner Mr. Kyle Copper said that the United States reaching a lowest oil demand in 13 years is terrible. The reduced demand that leads to increased inventories in the largest oil consumer of the world is exerting pressure on crude prices which can further decline to $90 per barrel. The last time it reached that lowest level was in October, according to Copper.

Recently released data showed that refineries in the United States during the previous week slashed their processing of crude to its lowest in nine months to reach 14.2 million barrels daily. This led to an increase in inventories of 4.2 million barrels, a quantity that is greater than what is expected. At Cushing, Oklahoma, inventories of Nymex crude-oil contract’s delivery point reached its highest level in six weeks.

In the meantime, North Sea Brent crude prices, the European benchmark, gained 0.5% or 51 cents for a third consecutive day to reach $112.7 per barrel.

According to analysts, Brent is increasing as refiners are coming up with options to oil from Iran before sanctions begin which includes the EU’s embargo. The premium of Brent to the crude of the United States at Cushing reached its peak level since November at $15 per barrel.

BNB Paribas Prime Brokerage director Tom Bentz said that the concerns about Iran are strengthening Brent crude more than the United States Benchmark. It seems like the two are different commodities because both do not really have something in common at the moment.

According to the Energy Information Administration, United States oil showed the largest one-week decline in 14 years to achieve an average low per day of 17.653 million barrels. A decline of 6% was posted in the oil demand compared to last year as gasoline, which is the most widely utilized petroleum commodity fell by 1.6% compared to an earlier week and 6.8% versus the previous year. The drop in gasoline demand to lower than eight million barrels daily occurred as average retail prices reached its highest ever in the month of January. Majority of refiners in the United States opt for crude oil prices that are closer to Brent crude compared to NYMEX costs.

Gasoline inventories rose by 3 million barrels in the past week to surpass the expected increase of 200,000 barrels. The current stocks are enough to cover about 29 days of the present level of demand, the highest coverage in a 13-year period.

March delivery’s reformulated gasoline blend-stock declined by 0.8% or 2.33 cents to finish at $2.8689 per gallon. Heating oil prices for March deliver gained 0.2% or 0.74 cent to end at $3.0529 per gallon.

By Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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