As US inventories rise, oil prices decline

17-Feb-05

The US government's weekly inventory report to be released on Wednesday, is expected would show a rise in oil supplies by 1 million barrels in the previous week on account of higher imports. The last report from the US Energy Information Administration had indicated that stockpiles in the world's largest energy consumer are almost 8% higher than they were last year. As US inventories rise, oil prices have declined. After 5 days of gains, oil prices have slipped as expectations of an increase in already robust US stockpiles countered worries of an Opec supply cut this spring. Light crude futures on the New York Mercantile Exchange slipped below US$48 to US$47.26 a barrel, while Brent crude was down to US$45.39. The International Energy Agency, which advises industrialised nations on energy policy, issued an outlook last week expecting stronger demand growth and lower non-Opec supply this year. OPEC has indicated that in the event of robust consumption, the cartel might need to cut supply for Q2-2005. In the event of a fall in demand, a faster, bigger cut will be implemented. On the supply side, Iraq has resumed oil exports from the North, after flows were halted by attacks since mid-December. Russia's oil production should grow by 5-6% this year and is likely to top out soon after that.