© Reuters. File photo: This photo was taken by Kyodo News. The bird’s eye view shows the Shibushi National Petroleum Reserve Base in Kagoshima Prefecture, Japan on January 18, 2019.Mandatory Credit Union/via Reuters
Author: Obayashi Yuka
TOKYO (Reuters)-Oil prices fell on Wednesday as the United States took the lead in coordinating the release of inventories from strategic reserves, alleviating concerns about tight global supplies, while investors profited from the previous day’s gains before the U.S. Thanksgiving holiday.
At 0122 GMT, US West Texas Intermediate (WTI) crude oil futures fell 12 cents, or 0.2%, to $78.38 per barrel, reversing the 2.3% gain of the previous day.
Futures fell 32 cents, or 0.4%, to US$81.99 per barrel, and rose 3.3% on Tuesday.
Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd, said: “The coordinated efforts of oil-consuming countries to reduce crude oil prices have prompted a new round of selling.”
He said: “Behind the decline is the profit-taking before the US holiday,” he added, adding that concerns about slowing demand in Europe have also suppressed market sentiment in the context of the resurgence of the COVID-19 pandemic.
The United States said on Tuesday that it will coordinate with China, India, South Korea, Japan and the United Kingdom to release millions of barrels of oil from its strategic reserves in an attempt to cool oil prices after OPEC+ oil-producing countries repeatedly ignore calls for more crude oil.
The newspaper reported on Wednesday that Japan would auction about 4.2 million barrels of oil from its national stocks.
Market sources cited data from the American Petroleum Institute on Tuesday as saying that gasoline inventories rose last week, while distillate inventories fell, adding to the pressure.
As of the week of November 19, crude oil inventories increased by 2.3 million barrels, while analysts expected a decrease of about 500,000 barrels. Data show that gasoline inventories increased by about 600,000 barrels, and distillate inventories decreased by 1.5 million barrels.
Nevertheless, some analysts said that after years of declining investment and a strong global recovery from the COVID-19 pandemic, the impact of coordinated releases on prices may be short-lived.
Goldman Sachs (NYSE:) analysts said that the coordinated release may increase the supply of crude oil by about 70 to 80 million barrels, which is lower than the market price of more than 100 million barrels.
Rystad Energy senior oil market analyst Louise Dickson said in a report: “The threat of increased supply in the short term will certainly artificially cause the oil market to become looser in the next 1-2 months.”
“However, the move by (U.S. President) Biden and other leaders may just postpone the timetable for supply issues, because emptying inventories will put further pressure on already low oil inventories,” he added.
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