BAKU, Azerbaijan, Dec.8
By Leman Zeynalova - Trend:
The US-led global release of strategic petroleum reserves may accelerate oversupply, Trend reports with reference to Fitch Solutions.
“The oil market will return to a significant surplus in H122. However, the timing of this will hinge on the impacts of the Omicron variant and response taken by OPEC+. Moreover, in response to high gasoline prices, the US has led a global coordinated release of strategic petroleum reserves, which may accelerate the oversupply, especially should OPEC+ continue with their plan to raise output by 400,000b/d in January,” reads the latest report released by Fitch Solutions.
The company believes that the market will likely remain loose for several years, allowing for only a gradual recovery in oil prices, beginning in 2023.
“Oil prices fell steeply at the end of November, as announcements around the strategic release of crude oil reserves coincided with renewed concerns for oil demand stemming from the Omicron variant. However, should OPEC+ significantly deviate from their tapering plan in response to this, an upward adjustment to prices would be warranted. Our core view is for OPEC+ to pause production rather than carry on as planned, given the uncertainty present due to Omicron and the recent and planned petroleum releases from strategic reserves,” Fitch Solutions says.
Two days prior to the collapse in prices on November 26, President Biden announced a coordinated effort led by the US to release strategic petroleum reserves.
“The move looks set to push markets into oversupply even sooner than previously expected, helping to ease prices for crude and petroleum products. However, the effort may prove short-lived, if OPEC+ counters by leaving production flat, rather than increasing it by the usual 400,000b/d increment in
January. The potential to release up to 70mn barrels of oil and refined product onto markets would roughly equate to the production increases expected by OPEC+ over the first three months of 2022. According to its production cut schedule, OPEC+ will be holding around 3.76mnb/d of supply out of the market by the end of the year,” the report says.
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