Oil prices rose on Tuesday after a move by the United States and other consumer nations to release tens of millions of barrels of oil from reserves to try to cool the market fell short of some expectations.
The U.S. strategic reserves release was made in concert with other such moves by China, India, South Korea, Japan and Britain, the White House said, as major consumer nations battle against rising inflation.
But analysts said the effect on prices was likely to be short-lived after years of declining investment and a strong global recovery from the COVID-19 pandemic.
U.S. West Texas Intermediate (WTI) crude futures were up $1.84, or 2.40%, at $78.25.
Brent crude futures were up $2.08, or 2.62%, at $81.50 a barrel after earlier dropping as low as $78.55.President Joe Biden’s administration said it would release 50 million barrels from the U.S. Strategic Petroleum Reserves (SPR), which will start hitting the market in mid to late December.
India announced the release of 5 million barrels of oil from its strategic reserves, while South Korea and Britain also confirmed they would participate.
“The market is not impressed with the Biden Administration’s announcement … because the majority of the release is actually a loan to the market and the volume that is going to be sold was already approved by Congress as part of the deficit reduction legislation,” said Andrew Lipow, president at Lipow Oil Associates.
The OPEC+ alliance between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has so far rebuffed repeated requests from Washington to pump more oil.
The United Arab Emirates Energy Minister Suhail Al-Mazrouei said on Tuesday the UAE saw “no logic” in increasing its own contributions to global markets at the moment, adding technical data gathered ahead of an upcoming OPEC+ meeting in December pointed to an oil surplus in the first quarter of 2022.
Eurasia Group analyst Henning Gloystein said “the developments point to a period of heightened political tensions between the world’s biggest consumers and OPEC+, which implies increased oil price volatility”.
Prices had dropped below $80 a barrel from a three-year high of more than $86 on Oct. 25 amid talk of a coordinated reserves release and potential hit to energy demand from a fourth wave of COVID-19 cases in Europe.