In This Article:
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower on Wednesday in a low-volume pre-holiday trade. The price action suggests major traders have already taken to the sidelines ahead of Thursday’s U.S. Thanksgiving holiday. The low volume scenario is also likely to extend into Friday, creating a long holiday weekend.
At 10:45 GMT, January WTI crude oil futures are trading $78.38, down $0.12 or -0.15% and January Brent crude oil is at $82.12, down $0.19 or -0.23%.
Reuters is also saying that the lackluster trade is being fueled by investors questioning the effectiveness of a U.S.-led release of oil from strategic reserves and the uncertainty over how producers will respond to the move.
US and Allies Challenge OPEC+ with Release of Oil Reserves
The administration of U.S. President Joe Biden announced on Tuesday it will release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to try to cool prices after OPEC+ producers repeatedly ignored calls for more crude.
Under the plan, the United States will release 50 million barrels, the equivalent of about two and a half days of U.S. demand. India, meanwhile, said it would release 5 million barrels, while Britain said it would allow the voluntary release of 1.5 million barrels of oil from privately held reserves.
Traders Await OPEC+ Response to Coordinated Oil Release
OPEC+, which includes Saudi Arabia and other U.S. allies in the Gulf, as well as Russia, has rebuffed requests so far to pump more. It meets again on December 2 to discuss policy but has so far shown no indication it will change tack.
Suhail Al-Mazrouei, energy minister of the United Arab Emirates, one of OPEC’s biggest producers, said before details of the release of U.S. reserves were announced that he saw “no logic” in lifting UAE supply for global markets.
An OPEC+ source said releasing reserves would complicate its calculations, as it monitors markets on a monthly basis. However, they and several analysts said the release was not as big as the headline figure suggested. They said Britain and India were releasing modest amounts and the United States had already announced some releases, and so the additional quantity was less than expected.
Short-Term Outlook
The headlines make it appear that 50 million barrels of crude oil will suddenly flood the market, thereby driving gasoline prices sharply lower. That’s not the case however.
The release from the U.S. Strategic Petroleum Reserve would be a combination of a loan and a sale to companies, U.S. officials said. The 32 million-barrel loan will take place over the next several months, while the administration would accelerate a sale of 18 million barrels already approved by Congress to raise funds for the budget.