Mecklai graph of the day: Surging oil inventories

Crude oil prices are influenced by several factors namely global growth prospects, supply demand scenario, crude oil inventories etc. Global growth prospect is no doubt the biggest driver as it would be a leading indicator for the future consumptions of crude oil. If there is pessimism across the globe and growth prospects are dim, demand for oil would certainly decline significantly hence impacting the current prices. Even build up in oil inventories is closely followed by oil traders as consecutive build up in oil inventories suggest slowing demand which would certainly increase the bearish bets on oil prices.

As seen in the below graph, oil prices have declined sharply from levels of $105 a barrel to $90.50 a barrel, partly due to consistent build up in US commercial crude oil inventories data, which is released on a weekly basis. US crude stockpiles are already near record highs, which indicate weaker demand in the world's largest oil consuming economy. This coupled with increasing concerns over the health of global economy could continue pressurizing oil prices to trade with a softer bias in the near-term.

The below graph shows the relationship between mounting US oil inventories and declining WTI oil prices

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