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Oil steadies as investors question reserve release

CommoditiesNov 24, 2021 03:08PM ET
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© Reuters. FILE PHOTO: An aerial view shows Shibushi National Petroleum Stockpiling Base in Kagoshima prefecture, Japan January 18, 2019, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

By Arathy S Nair

(Reuters) -Oil prices were largely steady on Wednesday as investors questioned the effectiveness of a U.S.-led release of oil from strategic reserves and turned their focus to how producers will respond.

Brent crude settled down 6 cents, or 0.07%, at $82.25 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.14%, at $78.39.

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

Japan will release "a few hundred thousand kilolitres" of oil from its national reserve, but timing has not been decided, its industry minister Koichi Hagiuda said on Wednesday.

Some countries have not taken a helpful position in terms of oil and gas prices, the head of the International Energy Agency said on Wednesday, saying not enough supply was reaching consumers.

Analysts said the effect on prices was likely to be short-lived after years of declining investment and a strong global recovery from the COVID-19 pandemic.

The coordinated release could add about 70 million to 80 million barrels of crude supply, smaller than the more than 100 million barrels the market has been pricing in, analysts at Goldman Sachs (NYSE:GS) said.

"On our pricing model, such a release would be worth less than $2 a barrel, significantly less than the $8 a barrel sell-off that occurred since late October," the bank said in a note titled "a drop in the ocean".

JPMorgan (NYSE:JPM) Global Commodities Research said any impact on oil prices from the release of crude may not be sustained for long. The brokerage also expects global oil demand to surpass 2019 levels by March 2022.

While attention has now switched to how the Organization of the Petroleum Exporting Countries and its allies will react to the joint reserve release, sources said the group was not discussing pausing oil output increases for now.

The group is to hold two meetings next week to set policy, sources said.

Jeffrey Halley, senior market analyst at OANDA, said the move to tap storage was "a one-shot wonder and markets responded appropriately".

U.S. crude stockpiles rose 1 million barrels last week, the Energy Information Administration said, compared with analysts' expectations for a decrease of 481,000 barrels. [EIA/S]

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

"While crude oil inventories built by 1 million barrels, crude oil inventories in the Strategic Petroleum Reserve dropped by 1.6 million barrels and along with continued declines in product inventories, I think this is supportive for prices," Andrew Lipow, president of Lipow Oil Associates, said.

The number of active U.S. oil rigs rose by six to 467 this week, the highest since April 2020, as higher crude prices have prompted some drillers to return to the wellpad.

Prices were also tempered by coronavirus infections that broke records in parts of Europe, prompting new curbs on movement.

Oil steadies as investors question reserve release
 

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Comments (6)
Ali Karimzadeh
Ali Karimzadeh Nov 23, 2021 11:35PM ET
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Do you write all of this because of 12 cents drop in oil price? Really? By the time you finished this article, oil went up again. Time to write another story. Be realistic.
lee lee
lee lee Nov 23, 2021 11:18PM ET
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Iran are comming back …
John Eisenbeiser
John Eisenbeiser Nov 23, 2021 11:18PM ET
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Iran never wemt anywhere
Tyrone Jackson
Tyrone Jackson Nov 23, 2021 10:22PM ET
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Every thing Biden touches turns to sheet. That is this liberal- Democratic Party way- Inflation?? Haha Just wait a few months. Another 1.5 TRILLION for his social scam scheme. Yea, that wouldn’t make oil prices higher! Lmfao
Ac Tektrader
Ac Tektrader Nov 23, 2021 10:22PM ET
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tyron.. now now now little man, your discription fits the last president to a tee. you know that orange skined looser trump.
Ac Tektrader
Ac Tektrader Nov 23, 2021 10:22PM ET
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that deficit building 1.5 trillion dollar tax bill scheme was all about lowering his, and his corporate friends' taxes, not yours. so far in 2020 it has added 1trillion dollars to the deficit.
Scott Reyes
Scott Reyes Nov 23, 2021 10:22PM ET
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there's so much wrong with your statements . we're all now more stupid for having listened to your thoughts may a fictious religious figure have mercy on your electro plasmatic essence.
Scott Bailey
Scott Bailey Nov 23, 2021 10:22PM ET
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Right on Tyrone! Dems have a brain the size of a period…………
Terry Danish
Terry Danish Nov 23, 2021 10:18PM ET
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Waste of reserves.
Poonjikarthikeyan Bakthar
Poonjikarthikeyan Bakthar Nov 23, 2021 9:44PM ET
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It has no effect on rising oil prices. Why?
Rich Ard
DetroitBull Nov 23, 2021 9:22PM ET
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Lol
 
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