In April, the price of crude oil continued the upward trend started in December following the OPEC meeting. The rise in price was mostly because of the continued supply cuts by OPEC, the removal of Iran in the international oil market, the crisis in Libya, Sudan, and Venezuela, and the ongoing trade talks between United States and China.
Yesterday, the price dropped after data from the Energy Information Administration (EIA) showed that there was a build in US inventories. In the past week, inventories rose by 9.9 million barrels, which was higher than the expected 1.48 million barrels. In the third week of April, the build was up by more than 5.5 million barrels. On Tuesday, data from the American Petroleum Institute (API) showed that the inventories were up by more than 6.8 million barrels.
As this happened, it was reported that OPEC oil production had declined to the lowest level in more than four years. This was mostly because of the continued decreases of output by Saudi Arabia and the ongoing crisis in Venezuela. Just this week, a small group of military officials attempted to overthrow the government of Nicholas Maduro. In April, OPEC produced more than 30.23 million barrels of crude in April, which was down by almost a million barrels from March. On more than one occasion, Saudi Arabia has said that it will swiftly move to replace the crude oil lost from OPEC.
The news that OPEC production has continued to drop will without a doubt aggravate Donald Trump, who prefers low oil prices. Just last week, he sent a tweet saying that OPEC members had agreed to lower the prices. Still, this decision will be deliberated in the March meeting of OPEC members and Russia in Vienna.
The price of West Texas Intermediate (WTI), which was previously rising declined to a low of $63.60. On the chart below, the price has dropped from a high of $66 to a low of below $63. Therefore, with the fundamentals relatively unchanged, and with OPEC determined to keep prices high, there is a likelihood that the price could retest the previous highs of $66.