West Texas Intermediate crude oil trades up 2.1%, or $0.98, at $48.70 per barrel. Wednesday’s rise comes following the International Energy Agency’s latest commentary on the state of the oil market and has the energy component on track to snap its six-day skid.
The oil market has seen an avalanche of bad news weigh on prices over the past several days, pushing prices down to their lowest level since November 30. Last week, the Department of Energy’s inventory data showed US inventories swelled to record levels. On Tuesday, Saudi Arabia said it increased production, but that it remained below its 10.058 million barrels a day cap that was agreed to in the OPEC deal.
However, in Wednesday’s report, the IEA says record US inventories should not come as a surprise as it is seeing a “triple surge in supply: rising imports (exports are also growing), rising domestic production and falling refinery utilisation.”
As for the OPEC production cuts, the IEA notes that the compliance rate has averaged 98%, but that figure is “very heavily influenced” by Saudi Arabia’s 135% compliance rate. It adds that non-OPEC production cuts have “far less data visibility.”
The IEA concludes, “For those looking for a re-balancing of the oil market, the message is that they should be patient, and hold their nerve.”