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Sunday, November 28, 2021

Oil heads to $ 100 despite US efforts to free up reserves: analyst

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Oil prices could rise further as the United States and other major consumers release millions of barrels of oil from their reserves to try to keep energy prices low, an analyst told CNBC.

“It’s not going to work simply because the strategic oil reserve – any country’s strategic oil reserve is not there to try to manipulate the price,” said Stephen Schork, editor of the Schork Report, on CNBC’s Wednesday. “Squawk Box Asia. “

Strategic oil reserves exist only to compensate for unexpected short-term supply interruptions, he explained.

“There is a considerable amount of bets that we will see $ 100 per barrel of oil,” Schork said, adding that it could happen as early as the first quarter of next year, especially if there is a cold winter in the northern hemisphere.

Calming oil prices

It’s a clear sign of desperation that this is the only tool in the box and it’s not going to work.

Stephen Schork

editor of the Schork Report

The american president Joe biden announced Tuesday that the U.S. will release 50 million barrels of its reserves as part of a global effort by energy consuming countries to calm rapidly rising fuel prices. Of that total, 32 million barrels will be a swap over the next few months, and 18 million barrels will be an acceleration of a previously authorized sale.

Other countries that made the joint commitment are China, India, Japan, South Korea and the United Kingdom.

So far, the UK has agreed to release around 1.5 million barrels while India committed to 5 million barrels. China, Japan and South Korea have yet to announce specific figures.

“We’re talking about 50 million barrels coming out of the United States, potentially another 50 from our partners. That’s 100 million barrels of oil, which is equivalent to a day of global demand for crude,” Schork said.

Vivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank of Australia, was more conservative in his estimates. In a note on Wednesday, he predicted that the number of barrels released by the six oil-consuming countries could rise to “just over 70 million”, as the release of oil reserves from the other countries may be “relatively moderate.”

The world consumed 97.53 million barrels of oil per day this year, up from 92.42 million barrels per day in 2020. according to the US Energy Information Administration.. In 2022, that number will increase to 100.88 million barrels per day.

“It is a clear sign of desperation that this is the only tool in the box and that it is not going to work. I think the market is going to mislead the United States on this and we are likely to see higher prices rather than lower prices. within a month, “Schork said.

Under such conditions, countervailing measures by both parties are likely to lead to greater volatility, producing ups and downs in oil prices and adding to uncertainty.

The United States should consider bringing US producers to the table and asking them to increase production to compensate for the supply imbalance, he added.

Commonwealth Bank’s Dhar said a rebound in oil prices on Tuesday indicated that “markets were disappointed with the coordinated release of strategic oil reserves.”

Duel with OPEC +

The latest development came after OPEC and its oil-producing allies. decided not to pump any more oil Despite oil prices rising to multi-year highs and pressure from the United States to help cool the market.

Under its current production plan, the group, known as OPEC +, will gradually increase oil production by 400,000 barrels per day each month. They should meet again next month.

Oil well pump jacks operated by Chevron Corp. in San Ardo, California, USA, on Tuesday, April 27, 2021.

David Paul Morris | Bloomberg | fake images

“So far, there have been no signs that OPEC + is reconsidering its plan,” analysts at the Eurasia Group said in a note dated November 22, ahead of Biden’s overnight announcement. A large-scale stock release by oil consumers ahead of the OPEC + meeting could spark a counterattack by the group, resulting in a “disruptive showdown,” they said.

“Under such conditions, compensatory movements on either side will likely lead to greater volatility, producing oil price spikes and greater uncertainty,” analysts at the Eurasia Group said.

“This would not ease the pressure on consumer prices or give producers the stability necessary to ensure a stable and reliable supply to a global economy that is still dealing with the worst pandemic in a century,” they added.

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