Prices of oil rose on Monday, rebounding from recent losses, on reports that the ally of the Organisation of Petroleum Exporting Countries (OPEC+) could adjust plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand.
Brent crude futures rose 97 cents or 1.2 per cent to $79.86 a barrel. WTI crude futures rose 89 cents, or 1.2per cent, to $76.83 a barrel.
Prices of the Brent and United States’ West Texas Intermediate (WTI) crude benchmarks fell more than $1 in early trading, hitting their lowest levels since October 1.
Japanese and Indian officials are working on ways to release national reserves of crude oil in tandem with the United States and other major economies to dampen prices, seven government sources with knowledge of the plans told Reuters.
The request came after the United States’ government was unable to persuade OPEC and allies including Russia, known as OPEC+, to pump more oil with major producers arguing the world was not short of crude.
The producer group agreed this month to stick to plans to raise oil output by 400,000 barrels per day (bpd) from December.
Oil prices rose after Bloomberg News reported that OPEC+ may alter plans to keep boosting production, citing delegates. Reuters has not verified the report.
“OPEC is sending a signal that if these players do this, they have some barrels they can withhold and will offset the impact of a release,” said Phil Flynn, senior analyst at Price Futures in Chicago.
Secretary-General of the Riyadh-based International Energy Forum, Joseph McMonigle, said yesterday he expects OPEC+ to maintain its plan of adding supplies to the market gradually.
“I see them sticking to their current plan in light of the supply surplus for next year, which is typical for oil markets in the first quarter,” he said. “If they are going to make a change, it will be because of unforeseen external factors, such as these lockdowns in Europe, any kind of strategic release, and shifts in jet fuel demand.
Any SPR release would only affect prices for two or three weeks, said Fereidun Fesharaki, chairman of consultancy Facts Global Energy.
The combined SPR release could be 100 million to 120 million barrels or even higher, Citi analysts said in a note dated Nov. 19. This includes 45 million to 60 million barrels from the United States, about 30 million barrels from China, 5 million barrels from India and 10 million barrels each from Japan and South Korea, the bank estimated.
Worries about demand have been fed by the prospect of national lockdowns in Europe, which has pressured prices.
Austria entered its fourth national lockdown yesterday as Europe again becomes the epicenter of the coronavirus pandemic. Germany could also impose fresh curbs, with politicians debating a lockdown for unvaccinated people.