After reaching increasingly high prices at the start of the year, oil prices finally took a sharp turn downwards this week. The rapid increase in prices earlier in the year was mainly due to the recent OPEC oil supply cuts and the United States' sanctions on the Venezuelan state-owned oil firm PDVSA.
Both international benchmarks for oil prices increased at the start of the week. West Texas Intermediate Crude Oil hit US$55.75 per barrel last week, its highest for 2019. Monday's session saw it drop by 70 cents at US$54.56 a barrel. Meanwhile, Brent Crude Oil hit a high of US$63.63 per barrel. Prices eventually receded to US$62.51 by the end of the session. According to market analysts, the drop in prices was mainly due to reports of increased inventories in the United States, which rose to around 943,000 barrels during the first week of February.
Baker Hughes released reports which indicated that it had a lesser number of active oil and gas rigs operating in the United States. The report revealed that the number of active oil rigs fell by 15 rigs, while a new gas rig was added. There were also recent indications that revealed that drilling efforts in the United States may be slowing down, further contributing to the rise in oil prices.
According to the latest surveys, the production of oil from the Organization of the Petroleum Exporting Countries (OPEC) also significantly dropped last month by an amount not seen in over two years. A report from Reuters, which tracked the supply of oil based on shipping data from the different oil companies, revealed that the production of oil from OPEC in January fell by around 890,000 barrels per day when compared to December 2018. OPEC managed to produce around 30.98 million barrels per day last month.
While OPEC and Russia have recently cut down their oil production, the United States has increased its output. The most recent figures revealed that the country is now producing more than 11.9 million barrels per day. The ongoing trade talks between China and the United States has also played a part in the oil price fluctuations. Mixed signals from both sides have also not helped in the matter. The recent strengthening of the US Dollar has made it hard for investors using other currencies to buy oil from the United States. According to market analysts, oil prices are currently fluctuating unpredictably given the number of mixed market cues from different global indicators.
