Oil prices mixed; investors skeptical about strategic reserve release effectiveness
Oil prices largely held on to their gains on Wednesday as investors were skeptical of the effectiveness of the US-led coordinated stockpile release from strategic reserves.
The talk that the US will release 50 million barrels from its strategic reserves and Japan 4.2 million barrels does not encourage investors, this amount is described as 'a drop in the ocean'. Investors are disappointed by the small size of the joint oil release by the US and other countries.
Brent crude futures, which rose 3.3% on Tuesday, fell 7 cents, or 0.1%, to $82.24 a barrel as of 0432 GMT.
West Texas Intermediate (WTI) crude futures rose 10 cents, or 0.1%, to $78.60 a barrel, after gaining 2.3% the previous day.
The US said on Tuesday it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and the UK to try to cool prices after OPEC+ producers ignored repeated calls for more crude supplies.
Japan said on Wednesday it would release some oil reserves without giving details. Nikkei newspaper reported that by the end of this year, Japan will hold an auction for about 4.2 million barrels of oil from its national stockpiles.
With the coordinated release according to the amounts mentioned, there is an added supply of crude oil of around 70 million to 80 million barrels, which is less than the 100 million barrels priced by the market.
Analysts say the coordinated release will cause years of investment to decline and the impact on prices will be short-lived after a strong global recovery after the COVID-19 pandemic. Emptying the tanks will further strain the already low oil stocks.
All eyes are now on how the Organization of the Petroleum Exporting Countries (OPEC), Russia and its allies will respond to the joint reserve release when they meet on December 2 to discuss policy.
The UAE energy minister said on Tuesday that he sees no logic in the Gulf OPEC producer supplying more oil to global markets as all indicators point to an oversupply in the first quarter of next year.
Meanwhile, US crude oil and gasoline inventories rose last week, while distillate stocks fell, according to market sources based on Tuesday's American Petroleum Institute figures.
In the week ending November 19, crude oil inventories increased by 2.3 million barrels against expectations of a decline of around 500,000 barrels.
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