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Oil prices decreased on expected deal to tap emergency crude reserves

November 25/2021

MOSCOW (MRC) -- Oil prices dropped, reversing gains in the previous session, on growing talk the United States, Japan and India will release crude reserves to tame prices despite the threat of demand faltering as COVID-19 cases flare up in Europe, said Hydrocarbonprocessing.

The U.S. Department of Energy is expected to announce a loan of oil from the Strategic Petroleum Reserve on Tuesday, and will be coordinated with other countries, a Biden administration source familiar with the situation said. U.S. West Texas Intermediate (WTI) crude futures fell 43 cents, or 0.6%, to USD76.32 a bbl at 0128 GMT. Brent crude futures fell 30 cents, or 0.4%, to USD79.40 a bbl.

Brent and WTI both rose 1% on Monday on reports that the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, together called OPEC+, could adjust their plan to raise oil production if large consuming countries release crude from their reserves or if the pandemic dampens demand.

With talk of a coordinated crude release having succeeded in driving prices back below USD80 a bbl and an actual release only expected to have a temporary impact, analysts are turning their attention to the potential hit to demand from a fourth wave of COVID-19 cases in Europe. "As Europe, and in particular Eastern Europe, struggles to halt the spread of COVID-19, the risk of lockdown-like measures looms large," said Rystad Energy analyst Louise Dickson.

She said demand in November for road and jet fuel in Europe is expected to fall to 7.8 MMbpd from 8.1 MMbpd in October, although part of that is a normal decline for this time of year. "If a new wave of lockdowns are enacted in Europe, oil prices will not be spared during the remainder of the flu season in the North Hemisphere," Dickson said in emailed comments.

As per MRC, crude oil futures were higher in mid-morning trade in Asia Nov. 24, extending gains of more than 3% overnight, after major oil-consuming economies announced a smaller-than-expected release from their strategic petroleum reserves. Some bearish pressures also came from an unexpected build in US crude oil and gasoline inventories last week. At 10:23 am Singapore time (0223 GMT), the ICE January Brent futures contract was up 14 cents/b (0.17%) from the previous close at USD82.45/b, while the NYMEX January light sweet crude contract was 25 cents/b (0.32%) higher at USD78.75/b.

We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, EIA said in a monthly report earlier this year, a smaller decline than its previous forecast for a drop of 210,000 bpd.
Author:Anna Larionova
Tags:North America, CIS, petroleum products, crude oil, neftegaz, petrochemistry.
Category:General News
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