(Updates with OPEC comments on SPR release)
By Barani Krishnan
Investing.com - Oil markets dipped Wednesday as traders took stock of a modest weekly build in U.S. crude stockpiles, reported a day after the United States and several other countries announced a coordinated release of their crude reserves in a bid to cool runaway fuel prices
The 50-million barrel crude release from the U.S. Strategic Petroleum Reserve, which will hit physical markets in December, barely registered on the psyche of traders when the Biden administration announced it 24 hours ago.
Crude prices rose as much as 3% by Tuesday’s close as many market participants dismissed the SPR release as a “drop in the barrel” — despite last week’s 6% selloff that sent prices to eight-week lows after initial reports about the administration’s plans to counter OPEC+ production squeezes. In a sense, it was a “sell-on-rumor-buy-on-fact” trade.
But market reactions on Wednesday suggested that some in the trade at least were giving deeper thought to the SPR release.
The Saudi-run OPEC bloc, which dominates the broader OPEC+ alliance, said the oil market may have a surplus supply of 2.3 mln barrels per day in January, and 3.7 mln bpd in February.
“OPEC panel predicts that the SPR release will increase oversupply by 1.1 million barrels per day,” the cartel said in a document that seemed prepared to justify more supply tightening on its part rather than to disprove those who criticized the release as inadequate to change any market fundamentals.
At Wednesday’s settlement, WTI, or the West Texas Intermediate benchmark for U.S. crude, was down 11 cents or 0.14%, at $78.39 per barrel.
London-traded Brent crude, the global benchmark for oil, settled down 6 cents, or 0.07%, at $82.25 per barrel.
Wednesday’s sluggish market action also came after the Energy Information Administration reported that crude stockpiles rose by 1.017 million barrels last week, versus analysts' expectations for a draw of 481,000 barrels.
Gasoline inventories showed a draw of 603,000 barrels last week, the EIA said, compared with expectations for a draw of 461,000 barrels.
Distillates stockpiles, which include diesel and heating oil, declined by 1.968 million barrels in the week against expectations for a draw of 1.002 million barrels, the EIA data showed.
Also weighing somewhat on sentiment was the Paris-based International Energy Agency which accused OPEC+ and Russia’s Gazprom (MCX:GAZP) as “creating fake tightness in the energy markets”.
“There is enough oil and gas, it just doesn't reach customers,” IEA executive director Fatih Birol said. “Certain major oil producers are taking an unhelpful stance.”
(With additional reporting by Sam Boughedda)