Oil futures were slightly lower early Wednesday, with traders awaiting a response from OPEC and its allies to a U.S.-led coordinated release of crude from strategic reserves, as well as weekly data on inventories.
West Texas Intermediate crude for January delivery
CL00,
CLF22,
fell 18 cents, or 0.2%, to $78.32 a barrel on the New York Mercantile Exchange. January Brent crude
BRNF22,
the global benchmark, was off 17 cents, or 0.2%, at $82.14 a barrel on ICE Futures Europe.
WTI and Brent both put in strong gains Tuesday, after the Biden administration announced it would release 50 million barrels of crude from the Strategic Petroleum Reserve in an effort joined by China, India, Japan, South Korea and the U.K. to push down soaring energy prices.
“Yesterday’s price response can be explained by the fact that this step had been anticipated for days, a sword of Damocles that had caused oil prices to fall sharply beforehand,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Read: Why oil prices jumped despite the U.S. tapping the Strategic Petroleum Reserve
The Organization of the Petroleum Exporting Countries and its allies — or OPEC+ — is due to meet next week. OPEC+ had rebuffed calls by the Biden administration and others to speed up production increases. OPEC+ has boosted output in monthly increments of 400,000 barrels a day as it unwinds earlier production cuts.
Now, traders wonder if OPEC+ will scrap planned increases in response to the release of strategic reserves.
The 50 million barrels that the U.S. plans to release would increase oil supply by 1.6 million barrels a day for one month, four times as much as OPEC+ intends to additionally place on the market in the coming month, Fritsch said, noting that OPEC+ could now even suspend its planned production hikes for 2 1/2 months without causing any shortage on the oil market.
It’s unclear, however, whether the U.S. will place the entire 50 million barrels on the market since, under the swap arrangement being used, it must first be taken by private oil companies and then returned, with interest, at a later date, Fritch said. “If there is no acute supply shortage, the companies in question are hardly likely to take advantage of this option unless they are given some additional incentive. It is perfectly conceivable therefore that the targeted figure of 50 million barrels will not nearly be used up in its entirety,” he said.
Analysts said data from an industry trade group showing a rise in U.S. crude inventories was also a drag on the market. The American Petroleum Institute late Tuesday said oil stocks rose 2.3 million barrels last week, while gasoline supplies rose 600,000 barrels and distillate supplies fell 1.5 million barrels, according to Dow Jones Newswires.
Official data from the Energy Information Administration is due Wednesday morning. Analysts surveyed by S&P Global Platts, on average, look for crude inventories to fall by 1.3 million barrels, while gasoline stocks are seen unchanged and distillates are expected to fall by 900,000 barrels.
“Given the API data, the risks are for this expected [draw] in inventories to not be met and we may even see a small build in crude inventories,” said Chris Weston, hed of research at Pepperstone. “Still, we’re not seeing any real worry in the crude price from the API data here. A build in inventories of over 3 million barrels would be a risk for crude longs.”
U.S. markets are closed Thursday for the Thanksgiving Day holiday. That means traders will be getting a raft of data earlier than usual, including the EIA’s weekly natural-gas report. Analysts surveyed by S&P Global Platts were looking for a 23 billion cubic foot withdrawal in the week ended Nov. 19.
January natural-gas futures
NGF22,
edged up 0.2% to $5.047 per million British thermal units.
Weekly rig-count data from Baker Hughes is also expected to be released later Wednesday.
December gasoline futures
RBZ21,
fell 1% to $2.3131 a gallon, while December heating oil
HOZ21,
edged up 0.1% to $2.3855 a gallon.
This post was originally published on Market Watch
