The impact of the Organization of the Petroleum Exporting Countries (OPEC) cuts has been dented by high U.S. stockpiles, as investor concerns drive prices down. Prices tied a 19-month high on Tuesday, but Wednesday’s drop canceled out this increase. U.S. crude for April delivery fell by 1.2 percent to $53.69 per barrel and Brent crude fell to $55.92 per barrel.
Analysts had previously speculated that the cartel’s record cuts would initiate a price rally, but strong American crude production has prevented OPEC from effectively controlling the market. As prices rise, American producers activate more oil rigs and upgrade their capacity, canceling out the decrease in global oil supply from the production cuts. According to the U.S. Energy Information Administration, crude oil stockpiles rose to 39 million barrels since early January. Some analysts are surprised prices rose at all, given the size of inventories.
While uncertainty remains whether American production will completely cancel out OPEC’s program to decrease supply and raise prices, the market is now less susceptible to actions designed to manipulate prices. Prices might still rise at the pump, but consumers will fill up their tanks at least a few more times before the changes are noticeable. This could coincide with the summer driving season, in which gas prices usually see a modest increase.
For more, visit The Wall Street Journal.