Oil is stabilizing while investors are questioning the reserve release, Reuters said

Author: Arathy S Nair

(Reuters) – Oil prices remained largely stable on Wednesday as investors questioned the effectiveness of the US-led release of strategic reserves and focused on how producers would respond.

It fell 6 cents, or 0.07%, to $ 82.25 a barrel, and U.S. West Texas Intermediate (WTI) gross futures fell 11 cents, or 0.14%, to $ 78.39.

The United States said it would extract millions of barrels of oil from its strategic reserves along with China, India, South Korea, Japan and Britain to try to cool prices after OPEC + rejected calls to pump more.

Japan will extract “a few hundred thousand kiloliters” of oil from its national reserve, but no time has been decided, Industry Minister Koichi Hagiuda said on Wednesday.

Some countries have not taken a supportive stance on oil and gas prices, the head of the International Energy Agency said on Wednesday, saying consumers were not getting enough supplies.

Analysts said it was likely that the price impact would be short-lived after declining investment and a strong global recovery from the COVID-19 pandemic.

Coordinated publications could add up to between $ 70 million and $ 80 million in gross supply, less than the $ 100 million barrel the market has put in prices, analysts at Goldman Sachs (NYSE 🙂 said.

“In our pricing model, a release would cost the barrels less than $ 2, significantly less than what was sold for $ 8 a barrel since the end of October,” the bank said in a note “a drop in the ocean”.

JPMorgan (NYSE 🙂 Global Commodities Research has said the impact on oil prices may not last long. The brokerage expects global oil demand to exceed 2019 levels by March 2022.

Now that attention has been paid to examining how the Organization of the Petroleum Exporting Countries and its allies will react to the joint reserve release, sources said the group is not currently discussing suspending oil production.

The group will hold two meetings next week to determine the policy, sources said.

Jeffrey Halley, a senior market analyst at OANDA, said the move to touch storage was “a single miracle and the markets responded well”.

Warehouses rose one million barrels last week, the Energy Information Administration said, with analysts expecting 481,000 barrels to fall. [EIA/S]

Crude stocks in the U.S. Strategic Oil Reserve fell to 604.5 million barrels last week, the lowest since June 2003.

“While crude oil inventories were built at one million barrels, crude oil inventories at the Strategic Oil Reserve fell 1.6 million barrels and with the steady decline in product inventories, I believe this is in favor of prices,” said Andrew Lipow, president of Lipow Oil Associates. , he said.

The number of active oil rigs in the U.S. rose sixfold this week to 467, the highest since April 2020, as higher crude oil prices pushed some drillers back into the pit.

Coronavirus infections, which broke records in some parts of Europe, also hampered prices, causing new restrictions on movement.