Oil fluctuated following the announcement of a coordinated release of strategic petroleum reserves, with the additional supply unlikely to tame price gains in some pockets of the market.
Futures in New York edged lower 0.3% after a government report showed U.S. stockpiles increased 1.02 million barrels last week. The White House announced on Tuesday a release of 50 million barrels from its reserves in coordination with the U.S., China, Japan, India, the U.K., and South Korea.
“A tiny headline build, an expected production rebound, and as the U.S. returns to being an oil importer, was not enough to do anything for crude prices,” said Ed Moya, senior market analyst at Oanda Corp.
The release of reserves was already priced into the oil markets for weeks, with oil having fallen $10 from its multiyear highs in October. The focus now turns to OPEC+ and how the group will respond to the move by some of its biggest customers. Prior to the announcement, the alliance said a release is unjustified by current market conditions and it may have to reconsider plans to add more supply at a monthly meeting next week.
The U.S. also confirmed Tuesday that its barrels -- which make up the bulk of the release -- will be mostly sour, or high in sulfur. That does little to solve an underlying problem of a shortage of sweet crudes, which are low in sulfur content. As a result, a key time spread that measures the health of those markets has surged markedly.
“This will do little to alleviate the ongoing tightness in sweet crudes,” Energy Aspects analysts, including Amrita Sen, wrote in a note to clients. “The U.S.-led effort to reduce crude prices in the short run will - with all else equal - lead to higher prices next year.”
