By Adedapo Adesanya
Crude oil prices recovered slightly after jittery signals followed the expectation that the United States would announce a Strategic Petroleum Reserve (SPR) release along with some other nations.
The Brent crude rose 17 cents or 0.21 per cent to settle at $81.41 per barrel, while the United States West Texas Intermediate (WTI) crude improved by 19 cents or 0.24 per cent to $79.20 per barrel.
Prices sank about 4 per cent to a six-week low after the market got word about a US request to countries and China’s decision to release some crude, before recovering some ground later on Thursday.
The US has reportedly asked China and other major consumers such as India, South Korea, and Japan to release crude from their strategic stockpiles too, in a coordinated effort to lower oil prices.
And the market reacted when China said it was already working on a crude oil release, a spokeswoman at the National Food and Strategic Reserves Administration noted on Thursday.
This is coming as part of bids to cool markets which comes as high gasoline prices and other inflationary pressures have sparked a political backlash.
But ease came when Japan and South Korea, two of the top world’s top oil exporters, have shown resistance to releasing reserves.
A Japanese industry ministry official said the US had requested the country’s cooperation in dealing with higher oil prices, adding that Japan by law cannot use reserve releases to lower prices.
A South Korean official said it was reviewing the US request for Seoul to release some oil reserves, but added it could only release crude in case of a supply imbalance.
However, if only the US and China release their reserves, it will likely drive prices lower at least temporarily.
The proposed release of reserves represents an unprecedented challenge to the Organisation of the Petroleum Exporting Countries (OPEC) because it involves top importer China.
This is evident as the prices ignored a bullish inventory report from the US Energy Information Administration (EIA) reported on Wednesday a surprise crude oil inventory draw of 2.1 million barrels for the week to November 12, against analyst expectations of a build of 1.55 million barrels.
The International Energy Agency (IEA) and OPEC have said more supply will be available in the coming months, and this could force Joe Biden’s administration to spring to action faster than expected.
OPEC and its allies, OPEC+ plans to meet on December 2. The group has taken a slower approach to boost output, viewing the economic recovery as too fragile to justify more supply.
