Crude oil price is trading sideways for the second session in a row after rebounding earlier in the week. The market is digesting news on SPR releases from various countries.
Concerns over the release of oil from Strategic Petroleum Reserves in several countries including the US, Japan, and China exerted pressure on crude oil price in the past week. In fact, WTI and Brent futures ended the week below the crucial level of $80.
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Over the weekend, Kyodo News announced the Japanese government’s plan to release oil from its reserves. Besides, on Tuesday, President Biden announced that the US will be releasing 50 million barrels from its SPR. South Korea, India, and China are also considering a similar approach.
However, the market appears to have shifted its outlook on the SPR releases. Indeed, Brent futures are back up above the psychological level of $80 to trade at $82.17 in Thursday’s session. While the benchmark for US oil – WTI futures – is still below this crucial level, it has rebounded by about 3.75% over the past two sessions.
According to Energy Aspects’ director of research, Amrita Sen, the releases will a bullish factor in the coming year. During an interview with Bloomberg, the analyst noted that the amount expected from the highlighted nations excluding China is about 65 million barrels. The figure is significantly lower than the 100-120b million barrels forecasted by various analysts.
Furthermore, the Asian countries in question have been releasing oil from their SPRs throughout the year. As such, the recent announcements are a continuation of what they have been doing.
Sen has also argued that about two-thirds of the released amount will need to be ‘repayed’. As such, rebuilding the capacity in the coming year is expected to increase demand and subsequently boost crude oil price.
Besides, the US is set to release soar oil as compared to the sweet light crude that refiners are looking for. Amid the high natural gas prices, refiners prefer the latter option in order to reduce the processing costs.
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