Oil prices could rise despite the United States and other major consumers releasing millions of barrels of oil from their reserves to keep energy prices low.
It’s not going to work because any country’s strategic petroleum reserve isn’t there to try to manipulate the price. Strategic petroleum reserves, he explained, exist only to compensate for short-term, unexpected supply disruptions. There are many bets out there that we’ll see $100 a barrel of oil.
Calming oil prices
Brent, the global benchmark, surpassed the psychologically critical threshold of $80 per barrel in October. Therefore prices have remained close to that level since. The international contract was trading near $82.50 in Asia on Wednesday afternoon. The United States would release 50 million barrels from its reserves as part of a global effort by energy-consuming countries to cool the rapid rise in fuel prices.
China, India, Japan, South Korea, and the United Kingdom are among the other countries that have made a joint commitment. Ivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank of Australia, was more cautious in his projections. In a Wednesday note, he predicted that the number of barrels released by the six oil-consuming countries would be just north of 70 million, as the release of oil stockpiles from the other countries would be relatively tame.
This year, the world consumed 97.53 million barrels per day, up from 92.42 million barrels per day in 2020.
Showdown with OPEC+
OPEC+ will gradually increase oil production by 400,000 barrels per day each month under its current output plan. They will meet again next month. There have been no signs that OPEC+ is reconsidering its program as of yet. A large-scale stockpile release by oil consumers before the OPEC+ meeting could prompt the group to respond, resulting in a disruptive standoff.
Under such conditions, countervailing moves by each side are likely to result in increased volatility, seesawing oil prices.