Oil Prices Most Volatile Since 2009
The nearly 20 percent rally in oil prices over the past week raised hopes in the oil industry that the financial bloodshed might be over. But hopes were quickly dashed on February 4 when prices erased much of their gains – March deliveries of WTI dropped by a whopping 8 percent in a single day.
Oil prices had risen over a three-day stretch on the back of major capital expenditure cuts among the oil majors. BP, ExxonMobil, Chevron, ConocoPhillips, and Royal Dutch Shell have all promised multi-billion dollar reductions in their spending for the year, recognizing the bear market for crude. The realignment in spending encouraged oil markets as investors hoped that the production overhang was close to balancing out. On top of that, rig counts dropped at the quickest rate on record the end of January.
As such, many thought that the supply-side was quickly correcting to the new low-price environment. But the storm may not be over.
Related: The Cure For Low Oil Prices Is Low Oil Prices
The Energy Information Administration (EIA) released its weekly status updateon crude oil inventories across the country. The EIA reported that oil stockpiles (excluding the Strategic Petroleum Reserve) increased by 6.3 million barrels, way above analysts’ estimates of about 3.7 million barrels. That has total oil inventories at 413 million barrels, the highest level in over 80 years.
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