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The reason for an oil change

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The reason for an oil change

The Energy Information Administrations’ (EIA) Crude Oil Inventories always measures the weekly change and records the number of barrels of the commercial crude oil kept by the US firm. The level of these inventories always affects the price of petroleum products that can be replicated and affect the inflation of a given economy. When there is an increase in crude inventories more than it is expected, this, therefore, portrays weaker demand, and there will be a bearish for crude prices. On the other hand, if there is a decline in the inventories is less than what is expected, then there will be a bullish price action on the crude prices.

Oil prices shoot more than 2% after the media outline that the scientist has developed a drug against the coronavirus, which continues to affect heavily on the global economy. On the other hand, the oil news reported that the Organization of the Petroleum Exporting Countries (OPEC) and its allies are considering further output cuts to ensure that it counters the potential squeeze on the global oil demand.

This lead to an increase of US crude inventory by 3.4 million barrels in the week to Jan 31 as compared to the Reuters poll for a rise of 2.8 million barrels. The fear of slump in the global oil demand has led US crude and Brent futures into contango this week. This involves a structure in which longer-dated oil futures trade at a given premium that gives the traders the courage to keep crude oil in storage for more profitable resale in the near future.

Therefore, it’s paramount the fluctuation of oil prices and inventory has been recently affected by the epidemic of coronavirus globally. On the other hand, it has also been affected by the demand for crude oil in the global market.

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