As of 9:27 a.m. EST, WTI crude prices had returned above $ 77, after erasing earlier losses and trading 1.30% to $ 77.75. Crude Brent prices returned to the $ 80 mark and approached $ 81, having risen 1.73% to $ 80.96.
The headline of the oil market on Tuesday morning was US President Joe Biden’s announcement that the Department of Energy would release 50 million barrels of SPR oil in a bid to bring down high gasoline prices as part of the ‘a coordinated effort with other major oil consumers. nations. The US SPR release is being done in parallel with other major energy consuming countries including China, India, Japan, Republic of Korea and the UK.
Despite the apparently high 50 million barrels, the US release actually equates to about two and a half days of US oil consumption, which was 20.5 million barrels per day (bpd) before the 2019 pandemic.
Other countries are opting for much smaller outlets, and the message seems to be that major oil consumers are coordinating their efforts to try to bring down high prices, while OPEC + sticks to its oil production plan. .
The oil market, however, has largely incorporated the price of SPR’s posts, as last week’s price drop showed. Analysts also point out that one-off sales of strategic reserves can do little to lower oil prices significantly. Related: Biden Announces 50 Million Barrel SPR Release To Lower Oil Prices
“We believe that strategic oil reserves are not a sustainable source of supply and the effect of such market intervention would only be temporary,” Barclays analysts wrote in a note ahead of publication, such as reported by Reuters.
Last week, Goldman Sachs said the market had already priced in the price of a concerted exit of crude from national reserves.
“There is a growing risk that OPEC + will react to an SPR publication by suspending planned increases in supply,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday ahead of the US announcement of the SPR publication. .
“The prospect of retaliation from OPEC + leaves potential for further volatility in the oil markets,” said ING.
By Tsvetana Paraskova for OilUSD
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