Oil prices saw an initial drop before steadying on Friday while long-term factors point to further pressures in the market. According to a report from Reuters, US West Texas Intermediate (WTI) crude futures stood at $68.96 per barrel while Brent crude futures stood at $73.59 per barrel. Brent was set to post another weekly decline due to market volatility.
Based on data from the Energy Information Administration (EIA), total US crude oil inventories increased by 3.8 million barrels to 408.7 million barrels last week. Despite this increase, the inventories level stands below the five-year average of nearly 420 million barrels.
Total US crude oil inventories increased by 3.8 million barrels last week
OPEC members Russia and Saudi Arabia are increasing their output. Both countries’ production levels stand at around 11 million barrels per day, similar to that of the US. Russia and other Middle Eastern countries are increasing their output to fill the upcoming gap which will be created by US sanctions on Iran.
Meanwhile, China, which is locked in a trade dispute with the US, has halted its purchase of US crude while also refusing to abide by the sanctions on Iran. This casts a shadow on long-term conditions. However, some analysts predict that the reduction in Iranian crude exports could cause a shortage in supply and send prices higher than $90 a barrel.
A combination of factors including decreases in Iranian oil exports, increases in OPEC oil production and the ongoing trade wars are contributing to a lot of uncertainty in the oil markets.