Oil prices went up in the global market on Thursday after Saudi Arabia’s national oil company, Saudi Aramco, raised the price of its crude oil for March shipments. This price hike applies to all oil grades and all regions where Saudi oil is sold.
This development comes at a time when the United States has reported a sharp increase in its crude oil stockpile. Normally, when there is a rise in oil inventories, it indicates lower demand, which could push prices down. However, despite the large buildup of oil reserves in the U.S., crude oil prices have managed to increase.
Latest Oil Price Update:
- Brent crude (the international benchmark) rose slightly by 0.04%, now selling at $74.61 per barrel.
- West Texas Intermediate (WTI) (the U.S. benchmark) went up by 0.08%, reaching $71.06 per barrel, up from its previous close of $71 per barrel.
Saudi Arabia’s Price Adjustment
Saudi Aramco raised the price of its most popular oil grade, Arab Light, by $2.40 per barrel, making it $3.90 per barrel more expensive than the regional benchmark. This is the highest price increase since December 2023 and the largest monthly price adjustment since August 2022.
Analysts believe Saudi Arabia made this decision due to several factors:
- Supply pressures: Global oil supplies are tightening due to production cuts by OPEC+ (a group of oil-exporting countries, including Saudi Arabia).
- Geopolitical concerns: Ongoing tensions in the Middle East are raising fears of supply disruptions.
- Future demand expectations: Saudi Aramco is optimistic that oil demand will remain strong in the coming months.
U.S. Oil Inventory Report
The latest report from the Energy Information Administration (EIA) shows a significant buildup in U.S. oil reserves:
- Crude oil inventories increased by 8.7 million barrels in the last week of January, much higher than the expected 5.02 million barrels.
- Strategic Petroleum Reserves rose by 300,000 barrels.
- Gasoline stockpiles grew by 2.2 million barrels.
This larger-than-expected increase in oil supplies could have put downward pressure on prices, but the market still reacted positively to Saudi Arabia’s price hike.
Why did U.S. inventories increase?
- Higher imports: The U.S. imported an additional 467,000 barrels per day compared to the previous week, mainly from Canada, which sent 347,000 extra barrels per day.
- Recovery in production: U.S. crude oil output increased by 232,000 barrels per day after a temporary decline due to winter storms.
- Increased refinery activity: U.S. refineries ramped up production, increasing their utilization rate by 2.4 percentage points. This led to a 2.23 million barrel rise in gasoline stockpiles but a 5.47 million barrel decline in distillate (diesel and heating oil) stocks due to higher demand caused by cold weather.
