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INSTANT VIEW US to release emergency oil reserves to cool prices


NEW YORK / LONDON, Nov. 23 (Reuters) – The White House said on Tuesday it would make 50 million barrels of oil available from US strategic oil reserves as part of a coordinated effort with other major savings to help cool oil prices. Read more

MARKET REACTION

Brent crude futures rose $ 2.29, or 2.9%, to $ 81.99 a barrel at 11:37 a.m. EST (4:37 p.m. GMT), after the news of the posts broke.

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US West Texas Intermediate (WTI) crude futures rose $ 1.68, or 2.2%, to $ 78.43 a barrel.

Brent and WTI fell the most last week since the week ending August 20. Both are on the rise this week.

COMMENTS:

ANDREW LIPOW, PRESIDENT OF LIPOW OIL ASSOCIATES:

“The market is not impressed with the Biden administration’s announcement that it will release 50 million barrels of crude oil, as the majority of the release is actually market loan and the volume that is going to be sold has already been approved by Congress as part of deficit reduction legislation. “

AMRITA SEN, CHIEF ENERGY ANALYST

“A lot will depend on the amount of new oil versus reconditioned oil that was released as SPR anyway. In addition, much of this oil will have to be refilled later in 2022. “

“At the same time, it could cause OPEC + to halt its January production increases, jeopardizing much of SPR’s exit.”

CARSTEN FRITSCH, COMMERZBANK ANALYST

Some delegates said OPEC + may rethink its strategy to increase production by an additional 400,000 bpd at next week’s meeting. To put it in perspective, 50 million barrels equates to an increase in production of 1.6 million bpd for a month or 1 million bpd for seven weeks.

GIOVANNI STAUNOVO, UBS ANALYST

“The SPR versions are a tool used to cover temporary production interruptions and are not useful for correcting imbalances caused by lack of investment and ever increasing demand. “

“The amount mentioned so far by other countries joining the United States seems more symbolic.”

He said that in the United States the figure of 50 million barrels was higher than market expectations, but the actual volume was only 32 million because 18 million were already due to be sold next year.

“A headline, but the details provide a less powerful narrative. “

HENNING GLOYSTEIN, EURASIA GROUP

“The developments point to a period of heightened political tensions between the world’s biggest consumers and OPEC +, implying heightened volatility in oil prices.”

CRAIG ERLAM, ANALYST AT OANDA:

“This decision is more than symbolic, but it is not a game-changer for the outlook for the market.”

“What has arguably a bigger impact on suppressing oil prices is the COVID situation in Europe that will ultimately affect demand.”

JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC:

“I know people are analyzing the volumes. This is a decent amount of crude oil to close the gap, and it sends a signal to OPEC + that consuming countries will no longer be pushed around by them.”

“OPEC + has been stingy with its production for months. Supplies have tightened and they have reached their target.”

“The last thing the global economy needs right now are high oil prices.”

EVERCORE ISI:

“As our sales (and our consensus) continue to point to a slack in 1H22, policymakers are trying to build an inventory cushion, reduce the pressure on product prices and guard against an externality event. (weather, geopolitics) which could drive prices higher as the market waits for rebalancing in 2022. “

“While the jawbone may have short-term price (and open interest) implications, the fundamental picture here remains constructive with many of the same factors that have helped to tighten the balance (added measured supply from the OPEC + and a moderate response from short-cycle supply sources, latent recovery in demand led by gasoline and naphtha). We maintain our 2022 forecast of $ 72 / bbl Brent while suggesting that lower capacity unused funds from OPEC until 2022 should remain favorable to the deferred price. “

ROB THUMMEL, PORTFOLIO MANAGER AT TORTOISE

“The President of the United States speaking of falling oil prices had a bigger impact than the actual release of oil from the Strategic Oil Reserve. US oil prices fell 10%, or nearly 9%. dollars a barrel since the White House began discussing its options. “

JIM RITTERBUSCH, PRESIDENT OF RITTERBUSCH AND ASSOCIATES

“While the reported 50 million barrels US exit is somewhat larger than previous expectations, the timing and duration of an exit could prove critical to the near-term price response. Another unexpected development has been comments from OPEC suggesting a possible reduction in planned production increases to offset part of the released SPR supply. “

“At the end of the day, we don’t see the SPR factor as capable of preventing a possible race to new price highs, perhaps by the end of the year.”

MARC ROWELL, SENIOR ENERGY BROKER IN BRITANNIA GLOBAL MARKETS:

“The market kind of heard that 20 million barrels would come into the market on the SPR… Then we saw 50 million, which was the downturn.”

Rowell said the fine print went into more detail: “Eighteen million is coming into the market, with 32 million going into the exchange, so we’ve gone up.”

CAROLINE BAIN, CHIEF COMMODITIES ECONOMIST AT CAPITAL ECONOMICS LTD:

“Early thoughts on the release of SPR are that it is not big enough to bring down prices significantly and may even backfire if it prompts OPEC + to slow the rate at which it is ramping up production. As such, it seems pretty symbolic and politically motivated. It also seems a little impatient. The consensus (and including us) thinks that the oil market will go into surplus in the first quarter if OPEC + continues to restore production, which would naturally lower oil prices.

MICHAEL TRAN, CHIEF EXECUTIVE OFFICER, RBC CAPITAL MARKETS:

“The 4 SPR facilities are 2 in Texas, 2 in Louisiana. So you are effectively releasing oil into markets – on the Gulf Coast – that are not relatively tight. We consider the Gulf Coast to have a relatively abundant supply.

“So the SPR action is more symbolic and not significant from an oil balance sheet point of view.”

PAVEL MOLCHANOV, ANALYST AT RAYMOND JAMES:

“Six major economies – each of which is committed, at least in a declarative sense, to achieving zero net CO2 emissions – are releasing crude oil from their strategic stocks with the explicit intention of driving down fuel prices.”

“By definition, high fuel prices are negative for fuel demand but a boost for energy transition… and yet, the consumer appeasement policy replaces the officially declared commitment to energy transition.”

BJORNAR TONHAUGEN, OIL MARKETS MANAGER AT RYSTAD ENERGY:

“For those drivers wondering if gasoline prices will come down as a result of the release of SPR in the United States, the reality is that this may not happen at all, or only with a significant lag.”

“First, the release of stocks, especially by the United States and maybe China, will be in barrels of crude. For this to have an impact on gasoline supplies, it must result in higher gasoline production from refineries, which could only happen with a lag and in a case where margins improve as refiners improve. expect gasoline demand to develop positively in the near term. “

CHRISTIAN REUTER, SECTOR STRATEGY IN NORD DEUTSCHE LANDESBANK GIROZENTRALE:

“(OPEC) has been very cautious this year, very focused on rebalancing the market and increasing prices. They were not at all impressed by any threat of losing market share to their shale competitors. Of course, the real next “test” of this strategy will be next year, when demand has completely returned to pre-crisis levels and for this reason growth rates will normalize. “

“Other than that, I see little reason why OPEC’s price orientation is going to change. And if it does, the SPR version only turns that ‘strategic’ stock into a ‘commercial’ stock. The consequence would be that OPEC will reduce production until the total new commercial stocks have been reduced to a level with which it is satisfied. So, I would not be too surprised if OPEC were to reduce its production of one way or another at his next meeting. “

FRANK MACCHIAROLA, SVP OF POLITICAL, ECONOMIC AND REGULATORY AFFAIRS AT THE AMERICAN PETROLEUM INSTITUTE:

“Congress has given the President and Secretary of Energy broad powers to manage the SPR and it is incumbent on the administration to exercise that authority as it sees fit. We believe any impact resulting from a release of SPR is likely to be short-lived unless it is paired with policy measures that encourage the production of US energy resources. “

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Reporting by Ron Bousso, Bozorgmehr Sharafedin, Shadia Nasralla, Noah Browning, Dmitry Zhdannikov, Stephanie Kelly, Scott DiSavino, Arathy Nair, Ahmad Ghaddar, Jessica Resnick-Ault; Editing by Nick Zieminski, Bernadette Baum and Emelia Sithole-Matarise

Our standards: Thomson Reuters Trust Principles.


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Cory E. Barnes

The author Cory E. Barnes