On Mar 21, oil prices registered the best two-day increase since last November, following a surprise fall in domestic crude inventories and renewed geopolitical uncertainty. After weeks of rise, domestic crude inventories declined recently, which boosted oil prices. Additionally, Saudi Crown Prince Mohammed bin Salman’s meeting with President Trump during the Saudi prince’s two-week visit to the U.S. also raised fears of Trump re-imposing economic sanctions on Iran, which were lifted on the first month of 2016.

This move may affect crude production of OPEC’s third biggest oil producer. This development along with other OPEC countries and Russia’s continued capping of crude output had a positive impact on oil prices.

Following the recent recovery in oil prices, mutual funds that have significant exposure to the energy sector could be solid investments.

U.S Crude Stockpiles Post Surprise Slump

The U.S. Energy Information Administration (EIA) reported that U.S. commercial crude oil inventories fell 2.6 million barrels to 428.3 million for the week ended Mar 16. U.S. commercial crude oil inventories posted their first weekly fall since the week ended Feb 16. Per EIA, domestic crude oil inventories slumped mainly because crude imports plunged 500,000 barrels per day (bpd) to an average of 7.08 million bpd last week.

The EIA also reported that total motor gasoline inventories and distillate fuel inventories slumped by 1.7 million barrels and 2 million barrels, respectively. Decline in domestic crude and gasoline inventories led both WTI and Brent crude to climb 2.5% and 3% to $65.17 per barrel and $69.47 a barrel respectively on Mar 21.

Geopolitical Tensions Benefits Oil Prices

On Mar 20, oil prices advanced before the meeting between Trump and Saudi Arabia’s crown prince. Trump said that Saudi Arabia is a “very wealthy nation” and the U.S. will be getting some of the country’s wealth “in the form of the purchase of the finest military equipment anywhere in the world.”

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