Inventories news sends oil prices lower

Oil inventories are at their highest level in over 20 years in the developed world, according to the International Energy Agency in a report on Tuesday.  The reason for the increase in stockpiles, according to the agency, was high prices that are slowing down consumption.  In consequence, the IEA has revised its prediction for demand growth around the world downward by 10,000 barrels per day to 1.24 million barrels per day.  Still, according to an analyst at the Agency, the overflowing stockpiles - which have led to speculation that storage capacity is nearly all in use - do not mean an oil glut.

While demand was down in May in Europe and many parts of Asia, the world’s two biggest consumers of oil and oil products, the US and China, saw demand increase during the month.  With oil demand at approximately 85 million barrels per day at present, 15 percent more than the daily average nearly a decade ago, larger stockpiles are said to be necessary in case of supply disruptions.  Even with the higher inventories now, according to the IEA, oil stored in Organization of Economic Co-operation and Development nations would cover 54 days of demand, while the same amount would have covered 59 days of demand 8 years ago.

The new data on inventories from the IEA sent crude oil prices down during the day.  July contract Brent crude on the International Petroleum Exchange was down $1.02 in early afternoon in London, to $67.91 per barrel.  Meanwhile, West Texas Intermediate crude for July delivery was down 87 cents in early electronic trading, to $69.47 per barrel.  The WTI decline was on top of a $1.27 decline on Monday.