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Weekly Outlook

Our rundown on the most interesting and market-impacting stories this week.

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Huge EIA Inventory Increase Fails to Soothe Oil Prices

On Wednesday (GMT+3), the US Energy Information Administration reported an increase in 9.382 million barrels in its crude oil inventories. This is significantly higher than both the estimated increase of 863,000 barrels, and the previous number of 2.421 million barrels. An increase in inventories usually implies weaker demand and would be bearish for crude prices. However, this time round, both WTI and Brent crude have settled up even after the news, with investors more focused on the continued market volatility and supply disruptions caused by the Russia-Ukraine conflict.

Post-Market

While the EIA has seen a huge build in its inventories, the figure failed to move the needle on oil prices, with WTI and Brent crude both just slipping slightly before continuing on their upward trajectory. As of writing, WTI is trading at 103.42, while Brent is trading at 108.04. Much of oil’s price action seems to still be contingent on the geopolitical barometer that is the Russia-Ukraine conflict. Moscow has said on Tuesday that peace talks with Ukraine had “hit a dead end” adding that it would not pause its military actions during the upcoming round of talks.

Meanwhile, the Organisation of Petrol Exporting Countries (OPEC) has warned that Russian crude oil and “other liquid exports” would be “nearly impossible” to replace should the EU completely ban all imports of Russian energy. Considering all current and possible future sanctions and voluntary action, this amounts to 7 million barrels a day.

In addition, OPEC has stated that it would not be accelerating its increase in production, remaining at its planned increase of 400,000 barrels a day – citing the reason that current market conditions were geopolitical and thus, beyond the organisation’s control.

However, the International Energy Agency (IEA) has said that it would be releasing 240 million barrels of oil, of which 180 million barrels will come from the US. US production is expected to rise from 11.8 million barrels per day currently to about 12 million within 2022.

Investors are now advised to keep an eye out for the upcoming Baker Hughes Crude Oil Rigs Count, which will be released on 14 April at 20:00 (GMT+3). The data shows the number of active US rigs and is seen as an indicator of future crude output.

As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.

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