Crude oil prices took a hit this week after the U.S. Energy Information Administration (EIA) reported an unexpected inventory build of 1.2 million barrels for crude oil in the week to May 31, and news of potential OPEC production increases.
The EIA report came as a surprise, as analysts had expected a drawdown in inventories following the American Petroleum Institute's (API) reporting of a crude oil inventory build earlier in the week. The unexpected inventory build weighed on prices, which were already under pressure due to concerns over potential OPEC production increases.
The EIA also reported builds in gasoline and middle distillates inventories for the same week, further adding to bearish sentiment in the market.
Oil prices had been on a downward trend since the start of the week, following news that some OPEC members were considering reversing production cuts later this year. The possibility of increased supply from OPEC and its allies weighed heavily on prices, with Brent crude falling to its lowest level in four months.
Despite these bearish factors, some analysts remain optimistic about the oil market's prospects. Warren Patterson, head of commodities strategy at ING, noted that the technical picture suggests that the oil market is entering oversold territory and could bounce back soon.
Meanwhile, Helima Croft, head of global commodity strategy at RBC Capital Markets, emphasized that any OPEC production increases are not binding and will depend on market conditions. Saudi Arabia has indicated that it will hit the kill switch on a fourth-quarter production increase if the market is oversupplied or sentiment is poor come September.
In summary, crude oil prices took a hit this week due to unexpected inventory builds and potential OPEC production increases. However, some analysts remain optimistic about the market's prospects and believe that prices could bounce back soon.
