Oil prices continued their rally yesterday after a brief slip in prices initially. The weekly oil inventory report released yesterday by the Energy Information Administration (EIA) showed that weekly oil inventory fell 4.22 million barrels for the week ending May 20th.
Analysts expected to see a drawdown of only 2 million barrels. The drawdown in inventory came after a small buildup in inventory for the week ending May 13th. The price of Brent oil gained 4.98% for the month and is now into the third consecutive month of gains after prices fell to lows below $30 in January of this year.
The $50 barrier in Brent oil, which is used to price much of the world's oil prices is a psychological barrier however and could keep prices pressured to the downside. Demand is seen picking up from emerging markets including China and India while producers in the Middle East are seen struggling with supply constraints. Although the markets still remain oversupplied in the longer term, the short term supply disruptions are being seen as a positive for oil. Oil imports to China increased 12% this year according to government data while in India oil consumption increased by over 10% in the first quarter fueled by record auto sales, according to estimates from the International Energy Agency.
Rising oil prices however is a concern as analysts expect that higher prices will bring back the US shale oil producers which could add to the supply glut.
Brent Oil Trades at 6-month High
Andamento del mercato - 26/05/2016