Oil gains despite release of reserves

 Oil gains despite release of reserves

Oil gains despite release of reserves.

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Brent Crude Oil and WTI were both trading steady on Wednesday after a release of oil reserves did not cause a dip in price as expected. Instead, Oil actually gained on Tuesday with a sharp bounce. At the time of writing (12:00 pm) Brent Crude was trading at levels around $81 and WTI was trading at around $78.

There are a few reasons for this. Firstly, Joe Biden’s plan to release reserves had already been documented for a week and therefore may have been priced in. His coordinated effort pushed China, India and Japan to release their reserves to lower energy prices. Meanwhile, the US itself is planning to release 50 million barrels of oil. The move is likely to spark backlash from OPEC+ members.

Crude Oil recently touched 7 year highs due to a surge in demand caused by countries recovering from the pandemic. However, there are some fears that demand may be affected by rising Covid-19 cases in Europe, but investors may see this as a short term phenomenon that doesn’t impact on longer-term demand.

So far, India has announced the release of 5 million barrels, Japan is expected to release around 4 million barrels. Additional releases from South Korea, China, and the UK could bring the total number of released barrels to 70 million. Further details and the full scope of releases are expected to come out in the next few days. 

How will OPEC+ officials respond? They may be forced to rethink their own plans to release crude oil. Any decision may be based on how price action plays out in the next few weeks and months.


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