Oil mixed, investors sceptical about effectiveness of joint reserve release

Tokyo, Nov 24 (BNA): Oil prices largely held their gains on Wednesday, as investors questioned the efficacy of the US-led coordinated release of stocks from strategic reserves and shifted their focus to the next step by oil producers.

Brent crude futures were down 7 cents, or 0.1 percent, at $82.24 a barrel by 04:32 GMT, after rising 3.3 percent on Tuesday.

US West Texas Intermediate (WTI) crude futures rose 10 cents, or 0.1%, to $78.60 a barrel, after rising 2.3% the previous day.

“Investors have been disappointed by the small scale of joint oil issuance by the United States and other countries,” he said.

Satoru Yoshida, a commodity analyst at Rakuten Securities.

He said that coordinated efforts by oil consuming countries have raised concerns that OPEC+ may slow the pace of production increase, adding that market attention is now turning towards the upcoming meeting of the OPEC+ producer group on December 2.

The United States said on Tuesday 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+ producers repeatedly ignored calls for more crude.

Japanese Prime Minister Fumio Kishida said on Wednesday that his government would release some oil reserves, without elaborating. The Nikkei reported that Japan will auction about 4.2 million barrels of oil from its national stockpile by the end of this year.

Analysts said the impact on the coordinated issue’s prices is likely to be short-lived after years of declining investment and a strong global recovery from the COVID-19 pandemic.

Analysts at Goldman Sachs said the coordinated release could add about 70 to 80 million barrels of crude supply, less than the more than 100 million barrels the market is pricing with.

“The threat of short-term oversupply is certainly creating an artificially more resilient oil market over the next 1-2 months,” Louise Dixon, chief oil markets analyst at Rystad Energy, said in a report, according to Reuters.

“However, the move by (US President Joe) Biden and other leaders may push the supply issue further down the schedule, as emptying storage will further pressure already low oil stocks,” he added.

All eyes are on the reaction of the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, together called OPEC+, to the joint reserve release when they meet on Dec. 2 to discuss policy.

The UAE energy minister said on Tuesday he did not see any logic in the Gulf oil producer OPEC supplying more oil to global markets when all indicators point to an oversupply in the first quarter of next year.

Meanwhile, US crude and gasoline stocks rose last week while distillate stocks fell, according to market sources citing figures from the American Petroleum Institute on Tuesday.

Crude inventories rose by 2.3 million barrels for the week ending November 19, versus analyst expectations for a decline of about 500,000 barrels.