Oil steadies near $80 after U.S. taps emergency reserves

An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

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  • U.S. to release 50 mln barrels
  • Release is part of coordinated move with major economies
  • India to release 5 million barrels
  • Surging European COVID-19 cases weigh on demand

LONDON, Nov 23 (Reuters) – Oil prices steadied near $80 a barrel on Tuesday after the United States announced plans to release up to 50 million barrels of oil from its reserves to cool the market.

The combination of a loan and a sale from the reserves was made in concert with other releases from strategic reserves by China, India, South Korea, Japan and Great Britain, the White House said. read more

But analysts said its effect on prices is likely to be shortlived after years of declining investments and a strong global recovery from the COVID-19 pandemic.

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Brent crude futures rose 9 cents, or 0.11%, to $79.79 a barrel by 1247 GMT after earlier dropping as low as $78.55. U.S. West Texas Intermediate (WTI) crude futures were down 34 cents, or 0.44%, at $76.41.

U.S. President Joe Biden’s administration said the release of 50 million barrels from the U.S. Strategic Petroleum Reserves (SPR) will start hitting the market in mid to late December. read more

India also announced the release of 5 million barrels of oil from its strategic reserves. read more

The OPEC+ alliance between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has so far rebuffed repeated requests from Washington to pump more oil.

The United Arab Emirates Energy Minister Suhail Al-Mazrouei on Tuesday said that the UAE sees “no logic” in increasing its own contributions to global markets at the moment, adding that technical data gathered ahead of an upcoming OPEC+ meeting in December pointed to an oil surplus in the first quarter of 2022.

A release of 50 million barrels is equivalent to an OPEC+ production increase of 1.6 million barrels per day (bpd) for one month, or 1 million bpd for seven weeks, Commerzbank analyst Carsten Fritsch told Reuters.

“This is quite significant,” Fritsch said.

Prices have dropped below $80 a barrel from a three-year high of more than $86 on Oct. 25 amid talks of a coordinated release and potential hit to energy demand from a fourth wave of COVID-19 cases in Europe.

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Reporting by Ron Bousso
Additional reporting by Roslan Khasawneh, Naveen Thukral and Sonali Paul
Editing by David Goodman

Our Standards: The Thomson Reuters Trust Principles.

source: reuters.com