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Oil prices were steady on Wednesday, but were below the more than three-year highs hit in the prior session as increasing U.S. fuel stockpiles and output affected an otherwise bullish market.
Brent crude oil futures were $73.89 per barrel, 3 cents up from their last settlement but around $1.60 lower than the November-2014 high of $75.47 per barrel hit in the prior session.
Despite the declines on Wednesday, which traders also faulted to profit-taking after the gains on Tuesday, many analysts said that the period of supply glut that began in 2014 has now ended due to production disruptions as well as strong demand.
Markets have been driven by production cuts led by the OPEC, along with other producers, which were implemented in 2017 with the purpose of supporting the market. In addition, political risk to supplies in the Middle East, Venezuela, and Africa has also affected the market sentiment. Due to the tighter market, the forward curve of the Brent is now above $70 per barrel until the end of 2018, and prices are above $60 per barrel through 2020.
Analysts said that while market sentiment is increasing bullish towards oil, the sustainability of the rally is a matter of concerned as the gains were mostly due to the political risk in the Middle East. The increasing production from U.S. shale is still a key market theme as well that continues to affect oil prices.
U.S. crude oil production has surged by more than a quarter since mid-2016 to more than 10.54 million barrels per day, beating Saudi Arabia's production of 10 million bpd. Only Russia currently produces more at almost 11 million bpd.
In the week to April 20, API reported U.S. crude stockpiles increased by 1.1 million barrels to 429.1 million. Official data from the U.S. EIA will be published on Wednesday.
