Energy

Oil prices to touch $100 despite the U.S. and other nations take efforts to release reserves

Oil prices to touch $100 despite the U.S. and other nations take efforts to release reserves

Highlights:

  • Despite US-led efforts to contain oil prices by releasing millions of barrels held as strategic reserves, Stephen Schork, editor of the Schork Report, cautioned reporters that prices could rise.
  • Oil prices have risen by more than 50% this year, with demand outstripping supply as more countries emerge from national lockdowns and harsh limitations imposed by the coronavirus outbreak last year.
  • Before Biden’s declaration, Eurasia Group analysts cautioned that a large-scale stock release by oil users before the next OPEC+ meeting may spark a retaliatory response by the group, culminating in a “disruptive stalemate.”

Strategy by the U.S and Major Countries

Despite the United States and other major customers releasing millions of barrels of oil from their stockpiles to try to keep energy prices low, one analyst told reporters that oil prices could rise.

“Simply because of the strategic petroleum reserve, it won’t work.” The Schork Report’s editor, Stephen Schork, stated, “Any country’s strategic petroleum reserve is not intended at manipulating prices.” He noted that strategic petroleum reserves exist only to compensate for short-term, unplanned supply shortages.

“There are a several bets out there that oil will touch $100 per barrel,” added Schork. He went on to say that it might happen as early as the first quarter of next year, especially if the Northern Hemisphere experiences a harsh winter.

Controlling oil prices

As more countries emerge from national lockdowns, oil prices have risen by more than 50% this year, with demand outstripping supply. Oil prices have risen as a result of the recovery from severe limits imposed last year owing to the pandemic. The resumption of international travel as more countries reopen their borders is also driving up demand for jet fuel.

In October, global benchmark Brent surpassed the psychologically important threshold of $80 per barrel, and prices have remained close to that level. The international contract was trading near $82.50 in Asia on Wednesday afternoon.

President Joe Biden of the United States announced on Tuesday that the United States will release 50 million barrels from its reserves as part of a worldwide effort by energy-consuming countries to slow the rapid rise in fuel prices. Over the following few months, 32 million barrels will be exchanged, and 18 million barrels will be accelerated from a previously permitted sale.

According to the US Energy Information Administration, the globe consumed 97.53 million barrels of oil per day this year, up from 92.42 million barrels per day in 2020. The figure is expected to climb to 100.88 million barrels per day by 2022.

OPEC Deciding not to pump more

OPEC and its oil-producing partners opted not to pump extra oil despite crude prices reaching multi-year highs and pressure from the US to assist cool the market.

The alliance, known as OPEC+, will progressively raise oil production by 400,000 barrels per day each month under its existing output plan. They’ll get together again next month.

“There have been no indicators that OPEC+ is reconsidering its proposal as of yet,” Eurasia Group analysts wrote in a note dated Nov. 22, the day before Biden’s announcement. A large-scale stockpile release by oil users ahead of OPEC+’s meeting could push the group to retaliate. They predict a “disruptive standoff” as a result of this.

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