OPEC panel says U.S. crude release will swell surplus in 2022
$Crude Oil Futures(DEC4) (CLmain.US)$ $United States Oil Fund LP (USO.US)$ $ProShares Ultra Bloomberg Crude Oil ETF (UCO.US)$ $Dow Jones Industrial Average (.DJI.US)$ Looking to lower energy prices, the U.S. announced earlier this week that it would release 50M barrels of crude from the Strategic Petroleum Reserve in concert with China, Japan, India, South Korea and the U.K. Much of the talk in the market is now focused on how OPEC+ will respond, with the possibility of a counterpunch if the group feels threatened. U.S. rig count adds another 6, extending 19-month high.
Bigger picture: While OPEC+ is scheduled to discuss production policy next week, the group's advisory body, known as the Economic Commission Board, said overnight the U.S. move could widen a crude surplus that's expected in early 2022. The excess would expand by 1.1M barrels a day in January and February to 2.3M and 3.7M per day, respectively, if 66M additional barrels were brought onto the market over the two-month period. Some OPEC+ delegates are also warning that releasing strategic reserves may lead OPEC+ to hold back crude supply in January. Crude futures -0.5% to $77.97/bbl.
"I expect oil to trade sideways until the next OPEC+ meeting," said Suvro Sarkar, energy analyst at DBS Bank Ltd. Meanwhile, the IEA has accused Saudi Arabia, Russia and other major energy producers of creating "artificial tightness" in global energy markets, urging OPEC+ to speed up the return of supplies.
Analyst commentary: Australia & New Zealand Banking Group expects OPEC+ will suspend its output hikes to provide a buffer to demand headwinds. Citigroup feels differently, saying it will likely stick to its planned increase of 400K bdp for January, because not doing so would undermine the alliance's claim of providing a public good and oil market stabilization. In any event, U.S. crude stockpiles rose by 1M barrels last week, the fourth weekly increase in five, according to the Energy Information Administration.
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ceerup : US wants to keep the oil price lower to avoid the persistent high inflation which would make their FED zero rate policy obsolete, that is the main reason they have suddenly become so much concerned about high oil prices, it certainly has nothing to do with the hardship of the not so well-off consumers. They are losing any kind of financial or moral justification to keep the interest rates at ridiculously low levels.
LITWENe : Keep adding to renewables and nuclear in the meantime. Expand our options to get away from fossil fuels.
ETFWorldSavior : China already said they don't know what the US is talking about...LoL
darthzazu : I’m all for OPEC+ showing discipline at this point.