Crude oil prices cruised to their highest level of 2010 Wednesday morning, before quickly reversing, as speculators consider new data on the level of crude supplies released by the Energy Information Administration.
The price of a barrel of crude for April delivery reached as high as $83.03 early Wednesday morning as speculators applauded the new data that showed a 1.4 million barrel increase in crude last week for a 343 million barrel total inventory level.
The Platts survey of analysts found the expectation was for 2.1 million barrels. Being much lower than the projected level of inventory caused an upward spike in Oil prices as the lower than expected number was taken as a sign of higher demand.
Analysts pointed out that despite the lower than expected inventory number, crude oil levels are still high for the current oil price. Traders seemingly agreed as after the running up to $82, oil prices dropped back in the later morning of the session to close near Tuesday’s price of $81.50.
OPEC, an amalgamation of the world’s largest oil producing and exporting nations, says a stable global economy for the remainder of the year should see an increase in demand of over 900,000 barrels of crude oil per day.
OPEC would prefer it if oil prices held at current levels, or headed higher. Real data suggests continued low demand for oil-based products in the US. Businesses are still hesitant to begin traveling and transporting at pre-recession levels. Without significant gains in US oil demand, it is hard to see OPEC’s forecast holding true.
Leading analysts have continued to call the price levels, currently 17 per cent greater over this last month, far too high based on supply and demand economics. Inventory levels remained near historic highs and OPEC has not intervened greatly by significantly cutting its production to try and drive oil prices higher.
Still a major catalyst for the firmness in oil prices seems to be its strong correlation with US stocks and the general feeling of economic recovery. Investors are bullishly confident that at some point, an improved economy will generate more oil consumption by businesses and consumers.
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