Will OPEC+ respond to the SPR release?

Will OPEC+ respond to the SPR release?
Analysis
Ahura Chalki
Author:
Ahura Chalki
Published on: 23.11.2021 18:34 (UTC)
Post reading time: 1.63 min
127

Oil jumped after the US decision! 


While US officials announced that they will release 50 million barrels of crude from reserves to cool down the market, the market reaction was more increasing prices.


In past days we had news and reports that the US in coordination with China, Japan, India, South Korea, and Great Britain trying to define an oil loan system, and finally, it was announced today. The US will add supply to the global market from its Strategic Petroleum Reserve, in a combination of a loan and a sale. The idea came right after OPEC+ rejected the US request to increase production in response to higher prices. 


And now, even if it can be a bit challenging for producers, OPEC, and its allies can respond by decreasing the production or even just pausing the increasing plan by 400,000 bpd/Monthly, which means again less supply and increasing prices. 


On the other hand, we should not forget about Covid concerns. Increasing infected numbers and even restrictions in some countries can endanger the demand level. 


The importance of the increasing oil price is mostly because of inflation, which currently is the main priority of the US government. In line with supply chain bottlenecks and other factors that still are there, increasing oil prices can increase the producer cost and inflation. There they will do their best to stop the bulls, while there are still many questions, like US production capacity. So the energy war will go forward with another increasing price and doubts in the market. 


From the technical point of view, 75.50 is the key pivot, and if the asset can not hold this level, lower levels will be likely. On the flip side, increasing from here can lead the prices to higher levels. Tonight and tomorrow, we will have the API and EIA weekly report from the US crude oil inventory levels, which must be followed closely by market participants. 


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