The oil price is under pressure due to rising inventories in the United States (US). Shale oil production in the country has again ramped up, pushing inventories further by the day. This while the OPEC countries are striving for a production limitation.
The US Energy Information Administration (EIA) announced on Wednesday, March 7, that oil inventories in the US have increased by 2,4 million barrels. This after the stock had already increased by 3 million barrels the week before. This increase is greater than analysts initially predicted.
American production continues to increase
The EIA said earlier this week that US oil production will increase to 1,4 million barrels per day this year. While the OPEC countries and Russia have mutually agreed to limit oil production in 2018, the US (not itself a member) is opening the oil tap further. Canadian and Brazilian oil production is also increasing.
Analysts believe that OPEC's production cuts to achieve higher oil prices will be offset by the US. Meanwhile, oil prices have been looking mostly downward since late January. The price of Brent oil closed on Thursday, March 8, at $63 per barrel, after being above $2018 at the beginning of 70. Further price drops are reportedly in the offing.
However, in the longer term (2030), there are fears of an oil shortage. For example, Fatih Birol (chairman of EIA) has stated that far too little is currently being invested in future production capacity.
US Steel War
De announced import tariffs on steel (25%) and aluminum (10%) in the US are probably also not helping the oil price. Now that American President Donald Trump has finally implemented his plans, this could give the global economy a blow. The oil price is usually strongly related to the economic situation in the world.