Oil prices rose to a week high on Tuesday after the United States and other countries announced a release of tens of millions of barrels of crude reserves to try to cool the market.
The United States said on Tuesday it would release 50 million barrels of its strategic reserves in coordination with China, India, South Korea, Japan and Britain, after OPEC + ignored calls for more crude.
Analysts noted that the effect on prices will be short-lived, after years of declining investment and a strong global recovery after the Covid-19 pandemic.
Paradoxically, after the announcement, crude prices rose.
Brent futures gained $ 2.61, or 3.3%, to $ 82.31 a barrel and US crude West Texas Intermediate (WTI) was up $ 1.75, or 2.3%, to $ 78.50 a barrel.
It was Brent’s biggest daily percentage gain since August and its biggest close since Nov. 16. It also pushed Brent’s premium over WTI to its highest since mid-October.
Talks for the coordinated release of reserves, the strength of the dollar, and the potential impact on energy demand from a fourth wave of Covid-19 cases in Europe have already seen Brent fall more than 10% from a three-year high. of 86.70 dollars registered on October 25.
“The release of strategic reserves was lower than expected and will be answered by lower production from OPEC +,” said Edward Moya, senior market analyst at OANDA.
OPEC + has so far rejected repeated requests from Washington to pump more oil.
“Crude prices have been down for more than two weeks due to speculation about strategic reserves,” said Mark Finley of the Baker Institute, explaining that prices had already incorporated an announcement of the use of strategic reserves.
The drop was close to 10% in recent days, amid rumors about the coordinated operation. But in the three months leading up to the announcement, between Aug. 19 and Nov. 22, WTI rose 20.5 percent.
Prices were also supported “by the fact that it is not clear how much oil will actually hit the market, or how much the other countries will contribute,” Finley added.
Attempts by the United States to pressure producers, especially Saudi Arabia, to increase their supply have not worked.
Louise Dickson, an analyst at Rystad Energy, said that “this historic and unorthodox move is a message to OPEC + that it is not the only player in the oil market.”
Biden has in his sights the large companies in the sector, indicated to transfer only the price increases to the service stations, while recording gigantic profits.
The White House asked the competition authority to rule “immediately” on the “possibly illegal” behavior of the oil companies, and does not rule out legal actions.
American reserves are the world’s largest emergency supply.
According to a senior US official, the release will begin between mid and late December, and further interventions are possible to stabilize the market.
Of the 50 million barrels that the United States will release, 18 million will be sold directly in the coming months, while the other 32 million will enter the market under an “exchange” system, since they will be returned to reserves in a few years.
US reserves are stored in underground locations in Louisiana and Texas, containing 609 million barrels, according to the Department of Energy.