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Unexpected Crude Stockpile Rise Leads to Slight Slip in Oil Prices

April 25, 2018 at 15:52 by Matt Jackson

Oil prices retreated slightly on Wednesday after the Energy Information Administration announced an increase of 2.2 million barrels of oil for the week ending April 20. This rise came despite expectations of a 2 million barrel drop, and has seen oil retreat below $73 per barrel.

The Energy Information Administration is the data and statistical agency of the Department of Energy in the USA. As well as helping shape policy and governmental policy making, they also release regular updates on the condition of the USA’s stockpile of oil, along with other relevant energy data.

Every Wednesday, the EIA produces a report that includes information on the number of barrels in the stockpile at that time. Analysts attempt to predict the announcement, and traders invest according to the figures. The market reacts with lower prices if the report highlights a greater increase than expected, while prices increase if there is a reduction or smaller increase than had been predicted.

In this case, analysts predicted a fall of 2 million barrels, but the report stated that the stockpile had increased by 2.2 million barrels – a significant swing.

The same report also highlighted an increase in imports that led to the stockpiling of oil.

Oil prices had enjoyed considerable increases in the past few weeks. Saudi Arabia suggested that they wanted to see oil prices reach as high as $100 per barrel, hinting that they would extend the OPEC deal to withhold supply of the commodity. Trump responded by saying that there would be consequences if OPEC nations continued to artificially control prices, but OPEC stated that there was no such thing as artificial prices.

Reports that Trump would attempt to renege on the Iranian deal also meant that many believed this would mean disruption to oil supply, further pushing prices upwards. However, there was a cooling of this sentiment following Trump’s meeting with French President Emmanuel Macron amid discussion that there was interest in a new deal to curb Iran’s nuclear program. Prices started to slide on Tuesday following this announcement.

At 16:30 GMT, WTI crude oil prices had fallen 0.25% to $67.53 per barrel. Brent crude fell 0.62% to $72.62.

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