US Oil Stocks Decline by 2.6 million Barrels Amid Unrest in Iraq; US Oil Import Declines

The Department of Energy’s weekly inventory report for crude oil stocks has revealed a reduction of 2.6 million barrels, which exceeds the expected 1.2 million barrels. Prices went up prior to the report and have been oscillating around the 104.5 level since then.

CNBC‘s Jackie DeAngelis reports that analysts believe June to be a month when refineries tend to build up inventories in anticipation on an increase in demand further down the road. However, she also points to the decrease in imports of oil and an increase in the use of the US domestic supply as a more probable explanation for the numbers.

The geopolitical factor is also believed to play an important role, as it has an impact not only on BRENT, but also on WTI. The current crisis in Iraq, where an al-Qaeda splinter group took control of the city of Mosul in the norther part of the country has instilled some fear in the market. Oil Minister Abdul Kareem Luaibi was quick to calm the markets and to assure that oil exports will not be affected in any way. The minister has also revealed Iraq’s plans to increase production by 4 million barrels per day by the end of 2014.

At its latest meeting in Vienna, OPEC officials have maintained the organization’s production ceiling. According to Bloomberg, for the next six months, the group predicts a demand of 30.4 million barrels per day, while production in April has been 29.6 million barrels a day.

Watch the full video below:

Only yesterday, during an intervention on CNBC, Smead Capital Management’s Bill Smead has argued for a decline in oil prices due to increased competition. According to him, “every Tom, Dick and Harry in the world is poking holes in the ground” and fierce competition will drive the prices down.

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