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Market News Japan and South Korea’s reserve dumping was blocked, U.S. oil closed up 1% and hit a six-week low in intraday

Japan and South Korea’s reserve dumping was blocked, U.S. oil closed up 1% and hit a six-week low in intraday

On November 18, U.S. oil closed up 1% in late trading to close at $78.32 per barrel. Affected by the U.S. requesting countries such as India, Japan and South Korea to release oil reserves, oil prices fell to a six-week low in early trading. However, because Japan and South Korea showed resistance to the release of crude oil reserves, U.S. oil rebounded slightly.

2021-11-19
9089
On Thursday (November 18) U.S. oil and cloth oil both rose 1% in late trading, closing at US$78.32/barrel and US$81.1/barrel, respectively. Investors weighed how much crude oil the major economies would release from their strategic reserves, and how much this would ease the pressure on global crude oil demand. Oil prices fell to $77.08/barrel earlier. As U.S. oil fell below $80 to attract bargain hunting from some investors, crude oil prices rose in volatile trading.

Spencer Vosko, head of crude oil at Black Diamond Commodities LLC, said that after falling from the mid-range of $80 last week, WTI crude oil prices seem to have gained some support at the $78 line.

An official from the Ministry of Industry and Commerce of Japan said that the United States has requested the Tokyo authorities to cooperate in response to rising oil prices, but he could not confirm whether the request includes a coordinated release of stocks. The official said that according to the law, Japan cannot release oil reserves to lower prices. A South Korean official also confirmed that the United States has asked the Seoul authorities to release part of its oil reserves. We are thoroughly reviewing the requirements of the United States, but we will not release oil reserves because of rising oil prices. We can release oil reserves when there is an imbalance between supply and demand, but not in response to rising oil prices.

Phil Flynn, senior analyst at Price Futures Group, said that Japan and South Korea have shown resistance to the release of crude oil reserves, so oil prices have rebounded slightly. The market will continue to be tight as it is preventing the release of oil reserves.

Given that the global economy has been dragged down by rising inflation, major oil-consuming countries are trying to keep prices down. The International Energy Agency said this week that with the rebound in global production and the surge in seaborne oil in recent weeks, some of the current tensions in the market have begun to ease. UBS Commodity Analyst Giovanni Staunovo said that it feels that the strategic oil reserve will be released soon. It is just a question of when and how much it will be released.

A few days after the United States invited the world’s largest importing country to jointly sell crude oil and jointly drive down energy prices, the country is releasing some oil from its strategic reserves. The current proposal involves the world's largest crude oil importer, which poses an unprecedented challenge to OPEC, and may at least temporarily depress prices.

Vortexa analyst David Wech wrote in the report that if oil demand returns to 2019 levels and oil-producing countries do not increase the number of oil fields, OPEC+'s idle oil production capacity may be exhausted in the next 12 months. The current idle capacity "at best" is 3 million barrels per day, while Saudi Arabia’s idle capacity is as much as 2 million barrels per day, with the rest in Russia and the UAE. If the export volume in the first half of October and November is compared with the average level in 2019, the average daily export volume of Saudi Arabia and the UAE has been about 500,000 barrels per day higher than the level before the epidemic.

(4 hours chart of US Oil)
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