Oil prices plunged on Wednesday as markets across the globe continue to reel from the fears over the volatility of the banking system. In addition, data on U.S. oil inventories has indicated a steady build-up in stockpiles over the last few days.
West Texas Intermediate crude oil, the U.S. benchmark, declined by nearly 7% on Wednesday; trading at $66.47 per barrel. This is in stark contrast to its performance on March 6, when crude was trading at around $80 per barrel.
Data released by the American Petroleum Institute on Tuesday showed that U.S. oil stockpiles have risen for a 10th straight week for the week ending March 10. The Energy Information Administration’s weekly petroleum report, which was released on Wednesday, reported a build up in crude inventories last week. Current inventory levels are 7% higher than the five year average.
Investor focus has also been drawn to a governmental decision on Monday to approve a massive drilling project in Alaska which could lead to a further boost in supply.
“The approval was for a pared-back project and it will still face legal challenges, but it is significant because President Biden has broken his campaign promise to ban all drilling on federal lands,” Capital Economics’ chief commodities economist Caroline Bain observed.