Wednesday, 09 October 2013 11:21

The State of Crude Oil Inventory Featured

the-state-of-crude-inventoriesIn recent years, the price of crude oil has been unpredictable, mostly in the upward trend. This increase in price of the precious commodity has left many pundits wondering what could be happening. Researchers have come up with all manners of reasons for the state of crude oil inventory.

While some cite the emergence of major energy consumers in India, China, and other major economies, there are those who believe the oil reserves are facing depletion. The argument that appears more valid is that the aggregate demand for crude oil has increased in recent years, hence the present state of the inventory.

Importance of Crude Oil Inventories
It is not a secret that crude oil is very essential for the global economy. Most industries in the world are driven by crude oil. Therefore, when oil prices fluctuate, most economies feel the pinch. Inflation rates are affected by oil prices, and in return, commodity prices take a certain direction. That is why regular information on crude oil inventory is so necessary. In the United States, this information is provided on a weekly basis. From the inventory levels, prices of petroleum products are determined.

Interesting Figures About Inventories
Several weeks ago, crude oil inventories in the US dropped by 20 million barrels. This was very baffling considering that Americans have not increased their oil usage so greatly in recent days. In any case, Americans have access to more oil substitutes such as solar energy, and are using energy more efficiently. Therefore, many people wonder about the source of this fall in inventory.
To understand this concern, consider the main suppliers of oil to the United States. At the start of July 2013, oil imports from Nigeria were less compared to the same period last year. Despite this, studies shows domestic production has increased if compared to July 2012. These are some of the facts observers cite about anomalies within the oil industry.

How are Crude Oil Inventories?
Globally, crude oil market is facing a myriad of challenges. For example, the Nigerian scenario is characterized by oil theft and turmoil. Syria, another major oil producer, is in a political crisis. Interestingly, the level of world crude oil inventory has on average been healthy in the last few months. Analysts observe that some factors have contributed to the current state of global inventories. The situation has largely been controlled by the combined effects of commercial and government crude oil inventory. The 93-day forward demand coverage for the period leading to June 2013 comes to the picture at this point.
For now, the Syrian crisis seems to be dictating the terms within the crude oil industry. Most traders are still interested in the situation in the Middle East nation, and any developments there affect the global oil market. The happenings in the region could also be the reason crude oil inventory has fallen. Traders are fearful of oil supply being disrupted in case the confrontation in Syria escalates.

Way Forward for the Market
The global oil market is very delicate and its ripple effects are felt everywhere. For sustainable healthy crude oil inventory levels, the crises in the oil producing regions of the world need to be solved. Hopefully, we will soon see the end of the problems in Syria, Nigeria, Egypt, and Libya. 

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