BAKU, Azerbaijan, Nov.26
By Leman Zeynalova – Trend:
Oil market will face surplus amid output growth amongst OPEC+ and the US, Trend reports with reference to Fitch Solutions.
“Brent crude has edged higher this week, rising from a six-week low of USD80/bbl, to reach around USD82/bbl at the time of writing. Prices have been somewhat subdued after several countries announced their plans to release volumes from their strategic petroleum reserves, in an attempt to tackle the large market deficit. The US is leading the charge, with a 50mn bbl release, with smaller releases announced by India, Japan and the UK and further volumes expected from South Korea and China,” the company said.
OPEC+ argues that the releases are unjustified and has indicated that it may pause or reduce its own production increases in December, to offset the additional volumes flowing out of the strategic reserves.
“While we expect the market will remain tight heading into the new year, strong production growth amongst OPEC+ and the US, combined with softening growth in demand, will tip the market back into surplus over 2022 and we hold to our current forecast for Brent to average USD72/bbl across the year,” reads the report released by Fitch Solutions.
On 23 November, US President Biden announced the release of 50 million barrels (mbbl) of crude oil from the US Strategic Petroleum Reserve (SPR).
Wood Mackenzie vice president Ann-Louise Hittle notes that of the release, 32 mbbl is a loan for delivery by end-April next year.
“The other 18 mbbl is a direct sale and is a continuation of what was already underway - sales from the SPR required under an earlier budget bill. It is not yet clear when or how China, South Korea and Japan will release crude oil while the SPR volumes of the UK and India releases are small, at 1.5 mbbl and 5 mbbl respectively, and not yet clarified on timing,” she says.
Hittle points out that 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.
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