Oil fell on Wednesday after the Energy Information Administration (EIA) reported an unexpected buildup of 7.2 million barrels when the forecast called for a slight drawdown. Crude’s upward momentum was put on pause after the higher supply data point. The API reported yesterday 3 million barrel buildup in US crude stocks and this time it was validated by the EIA with today’s report.
Oil had gained earlier this week after disruptions to supply and OPEC’s production was further reduced in March.
The balance between rising US shale production and the OPEC+ efforts is now tipping in favour of the organization lead by Saudi Arabia. Despite losing the psychological edge by disclosing that its Ghawar oil field is not as large as originally thought, shale production is facing its own problems.
The US-China trade deal has been on a positive track, but still no concrete details are available. The tariff war between the two largest economies resulted in a a global growth downgrade impacting energy demand forecasts. US Shale companies are recovering from the drop in oil prices in the Q4 and are scaling back some of their spending.
President Trump is not a fan of higher prices and he has used his tweeter influence with limited short term impact. The OPEC+ deal will remain in price until June with a highly anticipated meeting between producers expected to yield another extension.