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Oil hovers above six-week low as China readies crude reserve release

CommoditiesNov 18, 2021 04:37PM ET
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© Reuters. FILE PHOTO: A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS/Anna Driver

By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices rose slightly on Thursday after dropping to six-week lows as investors wondered about how much crude major economies would release from their strategic reserves and how much that would ease global crude demand pressures.

Prices fell to six-week lows early in the session as China said it was moving to tap reserves. On Wednesday, Reuters reported that the United States was asking large consuming nations to consider a stockpile release to lower prices.

Washington's bid to cool markets, asking China to join a coordinated action for the first time, comes as high gasoline prices and other inflationary pressures have sparked a political backlash.

"Japan and South Korea have shown resistance to releasing reserves, so we're coming back up a little bit," said Phil Flynn, Senior Analyst at Price Futures Group in Chicago. "The market is going to continue to be nervous, because it is on guard from a release."

Brent crude settled up 96 cents, or 1.2%, at $81.24 a barrel. The session low of $79.28 was the lowest since Oct. 7. U.S. West Texas Intermediate crude futures closed 65 cents, or 0.8%, higher at $79.01 a barrel. It also fell during the session to the lowest since early last month at $77.08.

A release, even if only from the United States and China, will likely drive prices lower at least temporarily.

Graphic: U.S. crude oil futures & forward prices slump since Nov 1 https://fingfx.thomsonreuters.com/gfx/ce/mopanlollva/WTIForwardCurveNov2021.png

In October, prices hit seven-year highs as the market focused on the swift rebound in demand as more people received COVID-19 vaccinations and lockdowns were lifted.

Prices rallied as demand rose and the Organization of the Petroleum Exporting Countries and its allies, called OPEC+, decided to raise output only slowly.

The International Energy Agency and OPEC have said more supply will be available in coming months, but Washington has pressed for a speedier pace.

The proposed release of reserves represents an unprecedented challenge to OPEC, because it involves top importer China.

China's state reserve bureau said it was working on a release of crude reserves although it declined to comment on the U.S. request.

A Japanese industry ministry official said the United States had requested Tokyo's cooperation in dealing with higher oil prices. but that Japan by law cannot use reserve releases to lower prices.

A South Korean official said it was reviewing the U.S. request for Seoul to release some oil reserves, but added it could only release crude in case of a supply imbalance.

Oil hovers above six-week low as China readies crude reserve release
 

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Comments (21)
Steven Kemp
Steven Kemp Nov 18, 2021 5:35PM ET
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china wont do anything to help and all the releases will only drive the price higher till we change the broken policys as when its cheaper people will fly and travel more
New Jazenevd
New Jazenevd Nov 18, 2021 1:21PM ET
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Chine will “look for reserves” indefinitely, waiting for senile fool in WH to do the job: waste US strategic reserve to help Chinese buyers of oil.
New Jazenevd
New Jazenevd Nov 18, 2021 1:20PM ET
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Oil prices went higher, because US oil production is low. The latter is caused by industry suppression and anti-business regulations provided by Biden administration. Production requires continuous investments and companies will not invest in hostile environment.
Todd Gray
Todd Gray Nov 18, 2021 1:14PM ET
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As long as the FED keeps interest rates low, oil companies are going to keep production down, sit on their inventories, and refuse to drill for new supply. OPEC, China, nor any other country is responsible for todays high oil, or any other storable commodities high price. Full blame rests on the reserve banks of the world.
Todd Gray
Todd Gray Nov 18, 2021 11:53AM ET
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Chinese PR is beat down. It's a smart move, if they follow through. It's what I'd do at this time, and in their position.
Todd Gray
Todd Gray Nov 18, 2021 11:50AM ET
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bidens evil China saves the day! and, he did nothing but go to talk to dock workers in Baltimore, and send out a memo to stop OPEC from controlling oil prices. what a wet noodle, he is.
eduff duff
eduff duff Nov 18, 2021 11:38AM ET
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Its going up and this news totally fake
Todd Gray
Todd Gray Nov 18, 2021 11:38AM ET
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based on what?
John Eisenbeiser
John Eisenbeiser Nov 18, 2021 11:38AM ET
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Todd Gray its no news. Just all bluster.
Stephen Reimer
Stephen Reimer Nov 18, 2021 10:57AM ET
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so let's just delay new CAPEX even further out into the future and let's see how China will build all of those Solar cells and Wind Turbines
John Eisenbeiser
John Eisenbeiser Nov 18, 2021 8:39AM ET
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I thought that China was smarter then sleepy Brandon!
Jonas Kvistfors
Jonas Kvistfors Nov 18, 2021 8:39AM ET
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They’re smarter than all of y’all
Steven Kemp
Steven Kemp Nov 18, 2021 8:35AM ET
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wont work only temporary, price will continue higher
Franco Dominguez
Franco Dominguez Nov 18, 2021 7:54AM ET
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US give orders to other countries, why it didnt realease usa reserves?
Stephen Reimer
Stephen Reimer Nov 18, 2021 7:54AM ET
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US released 3.5 mil last week, hence the oil inventory data with only a 1.6mil? decline against expectations for a build. if add the release the draw was over 5 mil
Andrew Ulferts
Andrew Ulferts Nov 18, 2021 7:54AM ET
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Stephen Reimer Somebody is paying attention.
Jamie An
Jamie An Nov 18, 2021 7:46AM ET
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US stopped producing shale oil and let other countries to produce more? Unfair selfish policy.
MK MK
MK MK Nov 18, 2021 7:31AM ET
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Those yankees almost every day convince me that they are silliest nation in the world. You have just add some more "help" for your "economy" by printing few more trillions. If course all other nations will lower prices for goods you import (better will give you for free) to satisfy your greed
Jani Po
JaniP Nov 18, 2021 3:41AM ET
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Using reserves to press down oil price is like peeing in your pants at winter. It warms up sometime, but eventually you just freeze up even more.
Paul Wu
Paul Wu Nov 18, 2021 3:41AM ET
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u get style points for creating steam but lose some style points for having a pee stain. guess in the end, it was still worth it
Iwan kadarusman
Iwan kadarusman Nov 18, 2021 3:18AM ET
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putin age again?
George Jetson
George Jetson Nov 18, 2021 3:14AM ET
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Joe Bye-done apparently slept past the 70's supply chain crisis, or he is really trying to tip Carter.
Eric Malm
Eric Malm Nov 18, 2021 1:14AM ET
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Are the approval ratings so catastrophic right now for Biden? The oil price is not even especially high with a 50% upside to ATH, or does he really think inflation is caused by oil and not because the US has printed parabolic volumes of dollars?  I hope OPEC just put their 400.000 bpd increase on hold until this crazy price manipulation is done. The globe needs an oil price of around 100 dollars to ensure investments are coming in sufficient amounts otherwise we will see 300 dollars in 3 years.
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Jonas Kvistfors
Jonas Kvistfors Nov 18, 2021 1:14AM ET
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The world is in a crisis - crisis is the normal state! Always has been… think about it! So +100$ oil will be cool. And will be paired partly by earnings partly by energy transition. Long term perspective. South west african oil is a great place to be right now, as well is ccs, hydro, wind, solar, mineral plays…
Lars Hellman
LarsH Nov 18, 2021 1:14AM ET
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prices went down by 50% during the 19 th century
Jonas Kvistfors
Jonas Kvistfors Nov 18, 2021 1:14AM ET
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Say what? You mean the 20th century (1900 talet) ? What prices are you referring to?
Empire Destroyer
Empire Destroyer Nov 18, 2021 1:14AM ET
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Joe wants to build another few printing machines with the infrastructure bill
Andrew Ulferts
Andrew Ulferts Nov 18, 2021 1:14AM ET
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Val Lange
Val Lange Nov 18, 2021 1:00AM ET
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The question is how much oil will be relesed and how long it will last?
Pritam Shindhe
Pritam Shindhe Nov 17, 2021 11:53PM ET
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I intrested yuer project
Scott Reyes
Scott Reyes Nov 17, 2021 11:47PM ET
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all this is gonna do is drop price maybe 5 10 usd for a month then we will be back to high prices with no storage for emergency and then prices will be higher . the danm stimulus checks and OTHER pandemic aid are what caused this issue. what we should of done is just kept everything open and limited contact expanded hours and we'd be fine. but who cares free money YAY look at us now.
Brandon cook
Brandon cook Nov 17, 2021 7:21PM ET
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if government is looking to tap into the SPR look for OPEC to maintain output levels or even cut production slightly. digging into these reserves is a risky move for the Biden administration as these reserves are designed for embargoes and supply disruptions not to combat inflationary pressures.
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Minh BUI
Minh BUI Nov 17, 2021 7:21PM ET
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Barani Krishnan  mass consumption is always more economic than individual consumption. Imagine, you spend the X amount of gas for max 100 person working in the building. That is the same amount you need to spend if there stays now 50 persons. And 50p stayed at home, they need to consume more for their house (normally, no consumption during working time if they are at work). So you can tell me, how can the consumption not rise if more people stay at home?
Jonas Kvistfors
Jonas Kvistfors Nov 17, 2021 7:21PM ET
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What if opec cut 2mbpd in response….
Barani Krishnan
Barani Krishnan Nov 17, 2021 7:21PM ET
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Minh BUI  Yours is a flawed argument that's conflating gas needed at home (i presumed you're referring to gas for heating) with gasoline needed for cars. The cost of producing fuels is already built into the price. The gasoline consumption simply cannot be the same level with people working from home versus having everyone back in the office. It's one of the reasons why oil remains at under $100.
Barani Krishnan
Barani Krishnan Nov 17, 2021 7:21PM ET
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Jonas Kvistfors  You're assuming that the unity within OPEC -- particularly the support of Russia, which is beyond any megaphone that can be held by the UAE's al-Mazrouei -- will stay intact as pressure grows all around from consumers, including China (who happen to have the strongest line through to the Kremlin). Frankly, the Russians don't need OPEC as much as the Middle East needs Russia. Russian cost of production is still below $55 and they can afford to concede on the flat price per barrel in a way the Saudis just can't. If OPEC knows better, it will open the valves a little more and earn some goodwill. But I doubt the ego of Salman brothers will allow that.
Barani Krishnan
Barani Krishnan Nov 17, 2021 7:21PM ET
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Jonas Kvistfors  The Saudi production cost, of course, is rock-bottom compared to any country. But their welfare like state budget is much higher than Russia's.
 
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