This Week In Energy: Data Pointing To Another Fall In Oil Prices
Oil prices have stabilized somewhat around the $60 per barrel mark, and over the past few weeks oil has shown less volatility than what we have grown used to in the preceding six or seven months.
But another swoon could be just over the horizon. That is because oil producers are starting to run out of storage. As production has soared and global demand has failed to keep up, oil producers have been diverting oil into storage tanks at a remarkable rate since last summer.
The latest EIA data shows that weekly inventories jumped by another 7.7 million barrels, with total inventories now having reached 425.6 million barrels. That is the highest level of oil sitting in storage in over 80 years, and more than 20% higher than the five-year average.
The data is also important because it highlights two things. First, oil production has not leveled off yet, despite several months of prices sitting below the breakeven mark for many producers. But also, the data indicates that U.S. producers may soon start to top off storage tanks. If production does not decline and oil storage capacity begins to run out, the glut of oil on the market could worsen pretty quickly, sending prices down once again.
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