Oil prices fell on Wednesday as the U.S.-led coordinated release of stocks from strategic reserves eased concerns over tightness in global supply, while investors took profits from the previous day’s rally ahead of the U.S. Thanksgiving holiday.
“The coordinated efforts by oil-consuming countries to lower crude prices prompted fresh selling. Behind the decline is also profit-taking ahead of the U.S. holiday, adding concerns over slower demand in Europe amid a resurgence in the Covid-19 pandemic also weighed on sentiment. said Kazuhiko Saito, chief analyst at Fujitomi Securities.
The United States said on Tuesday it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to try to cool prices after OPEC+ producers repeatedly ignored calls for more crude oil.
Japan will hold auctions for about 4.2 million barrels of oil out of its national stockpile, the Nikkei newspaper reported on Wednesday.
Adding to the pressure, U.S. crude and gasoline stocks rose last week while distillate inventories fell, according to market sources citing American Petroleum Institute figures on Tuesday.
Crude stocks rose by 2.3 million barrels for the week ended Nov. 19, against an analyst expectation of a decline of about 500,000 barrels. Gasoline inventories rose by about 600,000 barrels and distillate stocks fell by 1.5 million barrels, the data showed.
Still, some analysts said the effect on prices of the coordinated release was likely to be short-lived after years of declining investment and a strong global recovery from the Covid-19 pandemic.
The coordinated 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.
“The threat of more supply in the short term certainly creates an artificially looser oil market for the next 1-2 month period. However, the move by (U.S. President) Biden and other leaders may just be pushing the supply issue down the timeline, as emptying out storage will put even further strain on already low oil stockpiles,” Louise Dickson, senior oil markets analyst at Rystad Energy, said in a report.