Crude Oil Prices Rise Despite Yet Another Rise in US Inventories

Photo of author

By Jacob Maslow

Oil Drilling RigUS oil production is at it again. As I have mentioned already, there is an American oil paradox going on. The paradox is simple. The more rigs are decommissioned or mothballed, the more oil or natural gas the United States produces. That is just how efficient the oil extraction industry is in the United States.

This should not be a surprise. If you are an oil exploration or extraction company and you are spending millions of dollars on a field, even if you take out a rig, it is in your best interest to make the existing rigs as efficient as possible. Since this is the thinking across the board, this has spiked overall oil field productivity and US oil inventories continue to grow. In fact, there is so much oil in the United States that they are running out of places to store it.

US oil inventories are at an 80-year high. Think about that: 80-year high. Of course, US consumers aren’t going to feel much of this at the pump because for them to enjoy that oil, it has to first be refined. This is a problem because there is a production bottleneck in oil refining. This is why you cannot really blame American consumers to feel frustrated. They keep hearing the news of oil prices crashing while the price they pay at the pump keeps going up. Blame it on the refinery production bottlenecks. Don’t blame it on oil extractors.

With that said, the price of oil did pick up recently. As I have mentioned earlier, this is due to the dollar temporarily sagging. Since there is a tremendous amount of upward pressure on the value of the dollar, don’t expect this to be a long-term phenomenon. Enjoy the nice oil uptick while you can. It is not going to last until global demand patterns change.

Images Courtesy of DepositPhotos