Crude oil futures edged lower in mid-morning trade in Asia Nov. 23, paring modest gains notched overnight, as investors remained risk-averse despite recent comments by OPEC delegates that they could adjust their monthly output hike if governments choose to tap state oil reserves, reports S&P Global.
A coordinated SPR
“Crude is responding to news that the US is set to announce a coordinated SPR release later Tuesday,” said Vandana Hari, CEO of Vanda Insights.
“But the sell-off is muted because the market will likely await the actual announcement, given the weeks of talk but no action from the White House. Also, if there is indeed such a coordinated SPR sale, the impact will need to be weighed on the basis of the pace and scale of the barrels to be released,” Hari added.
Oil prices bounced off
The decline on Nov. 23 comes after oil prices bounced off 7-week lows in the overnight session, after OPEC delegates said the wider OPEC+ producer group was reassessing its monthly output hikes in response to any state oil reserve release.
Private deliberation
“There are no concerns at this time about the US and China releasing crude from strategic reserves because if the market were to be oversupplied, OPEC+ has the option of not increasing or reducing production,” one delegate told S&P Global Platts, asking not to be named to discuss private deliberations.
His comments were echoed by International Energy Forum Secretary General Joe McMonigle, who is in frequent contact with OPEC+ ministers.
The comments will bring into focus the tussle between OPEC+ and the Biden-led group of countries over the direction of oil prices. Some analysts have said that any state oil reserve release would be sizeable, with estimates in the range of 35 million to 120 million barrels.
Goldman Sachs’s opinion
Nonetheless, analysts at Goldman Sachs said Nov. 22 that the slide in global oil prices to below $80/b over the last month has “overshot” market fundamentals, with concerns over the return of lockdowns over COVID-19 cases in Europe and a slowdown in China overshadowing an ongoing supply deficit.
Goldman said high-frequency inventory data points to a current supply-demand imbalance of about 2 million b/d over the last four weeks, with OECD crude and Atlantic basin product inventories at seven-year lows.
The bank reiterated its forecast that Brent crude prices would average $85/b during the fourth quarter of 2021.
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Source: S&P Global
