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Oil Price Fundamental Daily Forecast – Recovery Suggests Traders Aren’t Too Worried About Strategic Releases

By:
James Hyerczyk
Published: Nov 18, 2021, 14:12 UTC

The threat of releases pressured prices earlier today, but the rebound suggests traders may have already fully-priced the news into the market.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Thursday after reversing early session weakness. The price action suggests bottom-pickers and profit-takers are stepping in following yesterday’s steep sell-off.

Helping to keep a lid on prices are concerns over increased supply after the United States asked some of the world’s largest oil consuming nations to consider releasing crude stockpiles in a coordinated effort to lower global energy prices, according to Reuters.

At 13:35 GMT, January WTI crude oil futures are trading $77.80, up $0.25 or +0.32% and January Brent crude oil is at $80.55, up $0.27 or +0.34%.

Threat of Increased Supply Weighing on Sentiment

The threat of rising supply pressured crude oil prices on Wednesday and earlier today, but the slight rebound suggests traders may have already fully-priced the news into the market.

According to Reuters, the Biden administration on Wednesday asked some of the world’s largest consuming nations – including China, India and Japan – to consider releasing crude oil prices in a move they think will pressure prices.

Although prices fell in response to the news, there are some who believe the move was politically motivated and in retaliation to OPEC+’s rebuffing of repeated requests from Washington to speed up their production increases.

“We’re talking about the symbolism of the largest consumers of the world sending a message to OPEC that ‘you’ve got to change your behavior,” one of the sources told Reuters.

An Unprecedented Challenge to OPEC

The current proposal represents an unprecedented challenge to OPEC, the cartel that has influenced oil prices for more than five decades, because it involves China, the world’s biggest importer of crude.

According to the latest report from Reuters, China’s state reserve bureau said it was working on a release of crude oil reserves although it declined to comment on the U.S. request.

Meanwhile, there could be a problem in Japan. According to Reuters, a Japanese industry ministry official said the United States has requested Tokyo’s cooperation in dealing with higher oil prices, but he could not confirm whether the request included coordinated releases of stockpiles. By law, Japan cannot use reserve releases to lower prices, the official said.

Short-Term Outlook

If Biden thinks he can rally other countries to release enough oil to lower prices for a prolonged period of time, then he should fire his advisor. These countries along with the United States are releasing oil that is supposed to be used for emergency purposes. Since this is not a real emergency, the releases will be limited.

Furthermore, if prices fall too far, too fast then OPEC and its allies will just stop increasing production to the tune of 400,000 barrels per day like they have pledged.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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