INSTANT VIEW-U.S. to release emergency oil reserves to cool prices

The White House said on Tuesday it would make 50 million barrels of oil available from the U.S. Strategic Petroleum Reserves as part of a coordinated effort with other major economies to help cool oil prices. MARKET REACTION Brent crude futures rose more than $1 to nearly $81 per barrel by 9:17 a.m. EST (1417 GMT), after news of the releases came out. U.S. West Texas Intermediate (WTI) crude futures also rose more than $1 to above $77 per barrel.


Reuters | Updated: 23-11-2021 20:06 IST | Created: 23-11-2021 20:06 IST
INSTANT VIEW-U.S. to release emergency oil reserves to cool prices

The White House said on Tuesday it would make 50 million barrels of oil available from the U.S. Strategic Petroleum Reserves as part of a coordinated effort with other major economies to help cool oil prices.

MARKET REACTION Brent crude futures rose more than $1 to nearly $81 per barrel by 9:17 a.m. EST (1417 GMT), after news of the releases came out.

U.S. West Texas Intermediate (WTI) crude futures also rose more than $1 to above $77 per barrel. Brent and WTI fell last week by the most since the week ending Aug. 20. Both are rising this week.

COMMENTS: ANDREW LIPOW, PRESIDENT AT LIPOW OIL ASSOCIATES:

"The market is not impressed with the Biden Administration's announcement that it will release 50 million barrels of crude oil because the majority of the release is actually a loan to the market and the volume that is going to be sold was already approved by Congress as part of the deficit reduction legislation." AMRITA SEN, ENERGY ASPECTS CHIEF OIL ANALYST

"A lot will depend on how much of this is new oil versus repackaged oil that was being released as SPR anyways. Moreover a lot of this oil will need to be refilled later in 2022." "At the same time, this may lead OPEC+ to pause their January production increases, netting off a lot of the SPR release."

CARSTEN FRITSCH, COMMERZBANK ANALYST "Some delegates said that OPEC+ might rethink its strategy to increase output by another 400,000 bpd at next week's meeting. To put things into perspective, 50 million barrels is equivalent to a production hike by 1.6 million bpd for one month or by 1 million bpd for seven weeks. This is quite significant."

GIOVANNI STAUNOVO, UBS ANALYST "SPR releases are a tool used to cover temporary production disruptions and are not useful to fix imbalances caused by lack of investment and still rising demand."

"The amount being so far mentioned from other countries joining the U.S. looks more symbolic." He said in the United States, the figure of 50 million barrels was above market expectations, but the effective volume was only 32 million as 18 million had been already planned to be sold next year.

"Big headline number but details provide a less strong narrative." LOUISE DICKSON, ANALYST AT RYSTAD ENERGY

"Much of the downward price impact has already been priced into the futures curve over the past week since China announced it was ready to cooperate following the Xi-Biden summit." "The sale of the reserves should more be viewed as 'swap', as these strategic reserves will need to be replenished at some point, meaning a demand uptick in the future."

"The move by Biden and other leaders may just be pushing the supply issue down the timeline, as emptying out storage will put even further strain on already low oil stockpiles." HENNING GLOYSTEIN, EURASIA GROUP

"The developments point to a period of heightened political tensions between the world's biggest consumers and OPEC+, which implies increased oil price volatility." CRAIG ERLAM, ANALYST AT OANDA:

"The move is more than symbolic, but it's not a game changer as far as the market outlook is concerned." "What's having have a greater impact arguably on suppressing the oil prices is the COVID situation in Europe which will ultimately affect demand."

JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC: "I know people are parsing the volumes. This is a decent amount of crude oil to bridge the gap, and it sends a signal to OPEC+ that the consuming nations are not going to get pushed around any more by them."

"OPEC+ has been stingy with their output for months now. Supplies have tightened up and they've achieved their objective." "The last thing the global economy needs right now is high oil prices."

EVERCORE ISI: "While our balances (and consensus) continue to point towards loosening in 1H22, policy makers are attempting to build an inventory cushion, reducing product pricing pressure, and insuring against an externality (weather, geopolitics) event that could spike price while the market awaits rebalancing in 2022."

"While jawboning can have implications for price (and open interest) in the near-term, the fundamental picture here remains constructive with many of the same drivers that have contributed to tightening balances (measured supply adds from OPEC+ and a muted response from short-cycle supply sources, latent demand upswing lead by gasoline and naphtha). We maintain our 2022 forecast of $72/bbl Brent while suggesting falling OPEC spare capacity into 2022 should remain supportive for deferred price."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Give Feedback