Oil steady as investors mull over release of reserves

London — Oil prices were steady on Wednesday as investors questioned the effectiveness of a US-led release of oil from strategic reserves and turned their focus to how producers will respond.

Brent crude futures were down 27c, or 0.3%, to $82.04 a barrel at 10am GMT, after rising 3.3% on Tuesday.

US West Texas Intermediate crude futures fell 23c, or 0.2%, to $78.27 a barrel, after a 2.3% gain in the previous day.

The US said it would release millions of barrels of oil from strategic reserves in co-ordination with China, India, South Korea, Japan and Britain, to try to cool prices after Opec+ ignored calls to pump more.

Japan will release “a few hundred thousand kilolitres” of oil from its national reserve, but the timing hasn’t been decided, industry minister Koichi Hagiuda said on Wednesday.

Analysts said the effect on prices was likely to be short-lived after years of declining investment and a strong global recovery from the Covid-19 pandemic.

The co-ordinated release may add about 70-million to 80-million barrels of crude supply, smaller than the more than 100-million barrels the market has been pricing in, analysts at Goldman Sachs said.

“On our pricing model, such a release would be worth less than $2 a barrel, significantly less than the $8 a barrel sell-off that occurred since late October,” the bank said in a note titled “A drop in the ocean”.

Attention has now switched to how Opec, Russia and their allies, together known as Opec+, will react to the joint reserve release when they meet on December 2 to discuss policy.

Meanwhile, US crude and gasoline stocks rose last week while distillate inventories fell, market sources said, citing American Petroleum Institute figures.

Crude stocks rose by 2.3-million barrels for the week ended November 19, against an analyst expectation of a decline by about 500,000 barrels.

Reuters