Crude oil seems to be pilling up globally, nearing total supplies in storage of almost 3 billion barrels according to recent figures released by the International Energy Agency. The pace of gains in the US decelerated substantially last week according to figures from the Department of Energy with stockpiles rising by 252,000 barrels, compared to expected additions of nearly 2 million barrels. The US is currently overwhelmed by the amount in storage, with inventories at a seasonal record of 487.30 million barrels, a quantity nearing April’s record high of 490.90 million barrels. Estimates of supplies of crude oil are reportedly 100 million barrels above the five-year seasonal average. The nation’s biggest oil storage facility, Cushing Oklahoma, saw inventories rise by 1.50 million barrels in the latest reporting period with a decline in diesel and heating oil owing to seasonal demand factors. In developed nations, the amount of oil inventories increased by13.80 million barrels in September, a month where usually there is a decline according to the Energy Information Administration. It is said that signs appear that some fuel-storage depots in the Eastern Hemisphere are to a near full in capacity.
Prices of crude have slid in the past year as Saudi Arabia, the head of the Organization of Petroleum Exporting Countries pumped more than their cumulative allowance with Russian output at the highest level since the fall of communism. In the US, output is not declining either, exceeding demand growth by a wide margin. A strong dollar and the expected Federal Reserve rate hike in December create high rates for the dollar-traded commodity, making the commodity high-priced for foreign buyers. Saudi Arabia, the largest producer in OPEC, intends to gain global market share with increased production and price competition while Iran, the fifth biggest producer, is right behind Saudi Arabia in trying to increase its exports to make up for exports lost to sanctions. The combination of the above factors combined with a strong dollar and persistent oversupply is leading towards a plunge in prices that is forecasted to persist through the end of 2016. Producers nevertheless remain unconcerned despite the possibility of sustained losses for the near-to-medium term.
