Oil was again under pressure as surging stockpiles added to fears that record US production and growing threats to global demand will all continue to push prices lower in the foreseeable future. In the last six weeks crude has fallen more than 20%, so now a bear market, with another leg down in the last 24 hours after the US Energy Department reported the biggest weekly jump in petroleum inventories for nearly 30 years. At time of writing West Texas is trading at just under USD52 a barrel, down from over USD66 a barrel in late April.
According to the Energy Department figures, commercial crude inventories jumped by nearly 7 million barrels last week, whilst stockpiles of all petroleum inventories skyrocketed by more than 22 million barrels, the biggest jump since 1990. This increase in inventories comes on the back of a surge in crude stockpiles over the last few weeks, now running at 11% higher than this time last year. Since the beginning of April, nearly 34 million barrels of crude been added to the stockpile.
Although OPEC decided to limit production not too long ago, with further reductions due to the ongoing U.S. sanctions on Iranian crude exports and the Venezuela situation, all of this has been largely offset by the increase in U.S. crude production, which climbed to nearly 12.5 million barrels a day, another record.
Also, the leader of the free world has been taking aim at Mexico again, with the threat of tariffs starting as soon as next week if he does not get his own way. He tweeted ‘Immigration discussions at the White House with representatives of Mexico have ended for the day. Progress is being made, but not nearly enough! Border arrests for May are at 133,000 because of Mexico & the Democrats in Congress refusing to budge on immigration reform’ adding ‘Further talks with Mexico will resume tomorrow with the understanding that, if no agreement is reached, tariffs at the 5% level will begin on Monday, with monthly increases as per schedule. The higher the Tariffs go, the higher the number of companies that will move back to the USA’.
That last point is debatable, but what is clear is that global growth is under pressure with the data pointing to a further slowdown ahead.