Oil prices rebounded on Tuesday after a coordinated release of crude from the strategic reserve by the United States and other countries sparked expectations that the OPEC+ producer group of countries would respond with an even lower output
NEW YORK (Pakistan Point News / Sputnik - 23rd November, 2021) Oil prices rebounded on Tuesday after a coordinated release of crude from the strategic reserve by the United States and other countries sparked expectations that the OPEC+ producer group of countries would respond with an even lower output.
"Worry over OPEC reaction to SPR (strategic petroleum reserves) comes to the fore and ironically supports prices," David Foale, an energy trader, said via Twitter as the West Texas Intermediate (WTI) benchmark for US crude rose more than 1% from Monday's settlement in New York.
Earlier on Tuesday, the US Energy Department said that President Joe Biden had authorized the release of 50 million barrels from the country's Strategic Petroleum Reserve. India and Britain followed up with announcements of a 5-million barrel and 1.5-million barrel release, respectively.
China, South Korea and Japan are expected to join the plan after producers in OPEC+ repeatedly ignored calls by the consuming countries to pump more crude to match soaring demand in economies emerging from the coronavirus pandemic.
Oil prices had risen more than 60% this year due to short supply versus demand, with OPEC+ focused on recovering from a market that crashed the prior year on demand destruction related to the COVID-19 crisis.
But hours after the consumer countries had made their announcements, crude prices remained higher on the day. WTI traded at $77.80 per barrel, up $1.05, or 1.1%, by 10:30 a.m. ET (15:30 GMT). Global crude benchmark Brent rose $1.43, or 1.8%, to $81.13.
WTI had crashed to a historic minus $40 per barrel in April 2020 at the height of the COVID-triggered oil price crisis. That prompted OPEC+, which is comprised of the 13-member OPEC bloc led by Saudi Arabia and ten other oil producers steered by Russia - to launch the steepest cuts ever in oil production.
WTI hit seven-year highs above $85 in October while Brent rose above $86, responding to the OPEC+ supply squeeze. That led to soaring inflation in oil consuming countries, particularly the United States, which is grappling now with its worst price pressures in more than 30 years.
Until Tuesday's SPR release by the Biden administration, OPEC+ had been adding just about 400,000 barrels daily to its output from cuts carried out earlier. Energy market experts estimate that some 5 million barrels of regular supply is being withheld by Saudi Arabia and its allies.
The coordinated move by the consumers could spark another production dialback by OPEC+, particularly by Saudi Arabia, John Kilduff, founding partner at New York energy hedge fund Again Capital, said.
"If the Saudis are upset by this, they could dial back in post-haste," Kilduff told Sputnik. "And they'll most likely target the 400,000 barrels increase they've been doing for the past few months."
OPEC+ is due to hold its monthly meeting on December 2, but the Saudis could announce a pullback in output before that, Kilduff said.
