Oil futures were slightly lower early Wednesday, with traders awaiting a response from OPEC and its allies to a US-led coordinated release of crude from strategic reserves as well as weekly data on inventories.
West Texas Intermediate Crude for January Delivery CL00,
The New York Mercantile Exchange fell 18 cents, or 0.2%, to $78.32 a barrel. Jan Brent Crude BRNF22,
The global benchmark was down 17 cents, or 0.2%, at $82.14 a barrel on ICE Futures Europe.
WTI and Brent both put in strong gains on Tuesday after the Biden administration announced it would withdraw 50 million barrels of crude from the Strategic Petroleum Reserve in an effort to cushion rising energy prices by China, India, Japan, South Korea and the UK. Will release oil. ,
“Yesterday’s price reaction can be explained by the fact that the move was anticipated for days, the sword of the Damocles that caused a sharp drop in oil prices,” Commerzbank commodity analyst Carsten Fritsch said in a note.
Why did oil prices jump despite the US exploiting the Strategic Petroleum Reserve?
The Organization of the Petroleum Exporting Countries and its allies – or OPEC+ – are due to meet next week. OPEC+ rejected calls by the Biden administration and others to accelerate production growth. OPEC+ has raised output in monthly increments of 400,000 barrels per day as it cuts earlier output.
Now, traders wonder whether OPEC+ will end the planned increase in response to the release of strategic reserves.
The 50 million barrels to be issued by the US would increase oil supplies by 1.6 million barrels a day for the month, four times the additional market space OPEC+ will take in the coming month, Fritsch said, noting that Given that OPEC+ may now even suspend its planned production growth for 2 1/2 months without causing any slack in the oil market.
However, it is not clear whether the US will keep the entire 50 million barrels in the market, as under the swap arrangement being used, it must first be taken over by private oil companies and then returned, along with interest, at a later date. must, said Frich. “If there is no acute shortage of supply, the companies under consideration are not likely to avail this option unless they are given some additional incentives. It is entirely conceivable so the target figure of 50 million barrels will not be utilised almost completely,” he said.
Analysts said data from an industry trade group showing a rise in US crude inventories also weighed on the market. Oil stocks rose 2.3 million barrels last week, while gasoline supplies rose 600,000 barrels and distillate supplies fell 1.5 million barrels, according to the Dow Jones Newswire, the American Petroleum Institute said late Tuesday.
Official data from the Energy Information Administration is due Wednesday morning. Analysts polled by S&P Global Platts expect crude inventories to drop by an average of 1.3 million barrels, while gasoline stocks see no change and distillates are expected to fall by 900,000 barrels.
“Given the API data, there are expected risks to [draw] “Inventory doesn’t have to be completed and we may even see a small build-up in raw materials,” said Chris Weston, head of research at Pepperstone. “Nevertheless, we are not seeing any real concern in crude oil price here from the API data. A build in inventory of more than 3 million barrels would pose a risk to the crude long. ,
US markets are closed on Thursday for the Thanksgiving Day holiday. This means traders will get a raft of data earlier than usual, including the EIA’s weekly natural-gas report. Analysts surveyed by S&P Global Platts were looking for 23 billion cubic feet of clearance for the week ended November 19.
January Natural Gas Futures NGF22,
Up 0.2% to $5.047 per million British thermal units.
Weekly rig-count data from Baker Hughes is also expected to be released later on Wednesday.
December Petrol Futures RBZ21,
down 1% to $2.3131 per gallon, while December heating oil HOZ21,
rose 0.1% to $2.3855 per gallon.