Oil prices held steady Thursday after OPEC announced that a planned release of reserves around the world could increase supply in early 2022, Bloomberg earlier reported.
Futures contracts traded near $78 per barrel, after the Organization of Petroleum Exporting Countries’ (OPEC) Economic Commission Board made the prediction.
On Tuesday, US President Biden announced the release of 50 million barrels of crude oil from the US Strategic Petroleum Reserve (SPR) in a bid to fight rising oil prices.
Some members of OPEC and the organisation’s allies, including Russia, known as the OPEC+ group, have indicated that they may hold back increasing production because of the release, according to Bloomberg.
OPEC+ is due to meet next week, but so far prices have yet to fall despite Biden’s plan.
Analysts at Citigroup said that they expect OPEC+ to stick to its planned increase of 400,000 barrels a day in January, as changing the plan would damage OPEC’s claim that it is promoting stability for the good of all in the oil market, Bloomberg said.
OPEC’s advisory body expects oil excess in markets to increase by 1.1 million barrels a day in January and February if 66 million barrels are injected by consumers from reserves over the two-month period, a document obtained by Bloomberg says.
“The lack of concrete plans and prompt timing weakens the downward price impact and can cause prices to rise because it is seen as a disappointment to what was expected. In effect, news of the SPR release had been widely discussed for several weeks and was already priced in,” Wood Mackenzie vice president Ann-Louise Hittle said on Tuesday.
The majority of the US SPR is made up of medium sour quality crude and Wood Mackenzie expected the 50 million barrels released from the US into the market to have a marginal impact on sweet-sour spreads in the US Gulf Coast (USGC) market.
