In a recent turn of events, the oil market witnessed a downward trend for the second consecutive day, influenced by the substantial increase in crude oil reserves in the United States—recognized as the largest oil consumer globally. This trend is further compounded by the anticipation that key oil-producing nations are unlikely to adjust their production strategies in the upcoming technical discussion.

On Wednesday, the price for Brent crude futures for May took a hit, decreasing by 83 cents or 1.0%, settling at $85.42 a barrel by 0805 GMT. With the May contract nearing its expiration on Thursday, the focus shifts to the June contract, which saw a reduction of 79 cents or 0.9%, closing at $84.84.

Similarly, the May delivery for U.S. West Texas Intermediate (WTI) crude futures experienced a decline of 78 cents or 1.0%, reaching $80.84.

This week’s price dip follows a significant rally to the highest levels observed since October of the previous year, yet the prices have managed to stay approximately 3% higher than the average closing price recorded in the early March.

Jun Rong Yeap, a market strategist with IG in Singapore, noted, “The notable increase in U.S. crude stocks, paired with the anticipated decision by OPEC+ to maintain its current output policy in the upcoming week, has triggered a pullback in oil prices, encouraging profit-taking after a robust rally in mid-March.”

According to sources referring to the American Petroleum Institute’s data on Tuesday, there was a 9.3 million barrel surge in U.S. crude oil stocks for the week ending March 22. Distillate stocks also saw an increase of 531,000 barrels, whereas gasoline reserves decreased by 4.4 million barrels.

The official data release is scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Conversations among members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies, collectively known as OPEC+, suggest a leaning towards maintaining the current oil output policy until the June ministerial meeting. This stance comes ahead of the Joint Ministerial Monitoring Committee’s virtual meeting on April 3, which aims to assess the market and adherence to the agreed production cuts.

Earlier in the month, OPEC+ members resolved to continue their production reduction of approximately 2.2 million barrels per day until the end of June. Compliance efforts are noticeable, with Russia mandating corporate production cuts and Iraq announcing export reductions to make up for previous overproduction.

Despite these efforts, the compliance of OPEC and OPEC+ with its production cuts has been under scrutiny. OPEC’s adherence exceeded its objectives by 190,000 bpd in February, as per a Reuters survey, highlighting the challenges faced by some members, including Iraq, in sticking to their quotas.

This scenario presents an insightful perspective for investors and market observers, underscoring the intricate balance between supply, demand, and geopolitical influences shaping the global oil market dynamics.

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