Oil rises more than $ 1 despite US announcement of reserve release

The oil prices They were trading near $ 80 a barrel on Tuesday, with a persistent upward trend, after the United States announced its plans to release up to 50 million barrels of its emergency reserves to cool the market.

The release of US strategic reserves is done in coordination with similar actions by China, South Korea, Japan, the United Kingdom and Indiahe told the White House on Tuesday, marking the first time that major oil consumers have come together to tackle rising energy prices.

However, analysts said the effect on crude prices is unlikely to last long, after years of a decline in investment in the industry’s infrastructure and robust global recovery after the Covid-19 pandemic.

Crude futures Brent they totaled $ 1.29, or 1.58%, at $ 80.98 a barrel at 14:30 GMT; while the futures of the West Texas Intermediate (WTI) were up $ 1.06, or 1.38%, at $ 77.82.

Both contracts reversed trend several times in the day after the US announcement, but were still on an upward trend due to investor fears of tight supplies in the medium term.

The government of the president Joe Biden said the release of 50 million barrels of Strategic Petroleum Reserves (SPR) from the United States will begin to hit the market in mid to late December.

India also announced the release of 5 million barrels of oil of their strategic reserves, while South Korea and Great Britain confirmed that they would participate in the coordinated plan.

Although the injection of 50 million barrels by the United States exceeds market expectations, the sale of 18 million barrels had already been planned, said UBS analyst Giovanni Staunovo.

The headline sounds great, but the details provide a less strong narrative, “he explained.

“SPR releases are a tool used to cover temporary production interruptions and are not useful to correct imbalances caused by lack of investment and still increasing demand,” he explained.

Biden, who faces low approval ratings amid rising inflation, has repeatedly asked the Organization of Petroleum Exporting Countries and his allies, a group known as OPEC +, to extract more oil.

But the group has rejected the requests as members seek to meet their existing targets for production increases and fear that a resurgence of coronavirus cases will once again undermine demand.