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Oil steady as OPEC says release of crude oil reserves will boost surplus

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On Thursday, oil prices in London remained steady after OPEC said a coordinated release of reserves could add to a crude surplus expected early next year.

New York crude futures are trading near $78 a barrel. In advance of an OPEC+ meeting next week, the group’s advisory board – the Economic Commission Board – made the projection. There was some concern this week that the cartel could hold back crude supply in January if it releases strategic reserves.

Mixed predictions are made about the response. OPEC+ might stick to its planned increase of 400,000 barrels a day for January because reducing supply would undermine the group’s claim to provide public goods by stabilizing oil markets. The alliance, however, is suspending the hike to buffer against demand headwinds.

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Bloomberg obtained documents showing that OPEC’s advisory group predicted that 66 million barrels would be injected by major consumers on average over the two-month period, causing the excess in markets to expand by 1.1 million barrels a day.

The Energy Information Administration reported Wednesday that crude stockpiles increased by 1 million barrels last week, the fourth increase in five weeks. Cushing, Oklahoma, a key storage hub, expanded its inventory for a second week.

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On the other hand, the International Energy Agency accused Saudi Arabia, Russia and other major oil and gas producers of creating “artificial tightness” on global oil markets, urging OPEC+ to return supplies as soon as possible.

Despite President Joe Biden’s call to address rising energy prices, crude prices had declined in the past month. However, Tuesday’s landmark plan fell short of expectations and resulted in rises. Now, the world’s attention turns to OPEC+ and how it will respond to its move.

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