The United States unites many countries to release crude oil reserves Why international oil prices did not fall but rose

The US government announced on November 23 that it would unite with a number of major oil consumers to release crude oil reserves in order to cool oil prices, but international oil prices did not fall but rose
on the same day.

Light crude futures for January 2022 delivery rose $1.
75, or 2.
28%, to settle at $78.
50 a barrel on the New York Mercantile Exchange by the close of the day
.
London Brent crude futures for January 2022 delivery rose $2.
61, or 3.
27%, to settle at $82.
31 a barrel
.

Market participants believe that the release of crude oil reserves is difficult to have a sustained impact on oil prices, and the significant decline in international oil prices in previous trading days reflects that the market digested the news in advance, and the specific measures announced by the United States on the same day were not as strong as the market expected
.

Recently, gasoline prices in the United States have risen to a seven-year high, and domestic calls for the release of strategic oil reserves to stabilize oil prices are growing
.
The White House announced on the 23rd that the US Department of Energy will release 50 million barrels of crude oil from the Strategic Petroleum Reserve to alleviate the mismatch between oil supply and demand when the economy recovers from the new crown epidemic and reduce oil prices
.

The U.
S.
Department of Energy said the 50 million barrels of crude oil will begin to be put on the market as early as mid-to-late December, of which 18 million barrels have been approved by Congress for direct sale, and the other 32 million barrels are short-term swaps that will be returned to the Strategic Petroleum Reserve
in 2022 and 2024 after oil prices stabilize.

Helima Croft, head of global commodities strategy at RBC Capital Markets, expects that given that India has announced plans to release 5 million barrels of crude oil reserves, plus the release of Japan, South Korea, the United Kingdom and other countries, the scale of crude oil reserves released by multiple countries is expected to be 65 million barrels to 70 million barrels
.

Data show that the current size of the US strategic crude oil reserves is just over 600 million barrels, while the global average daily oil demand is about 100 million barrels
.

Rob Howorth, investment strategist at United Bank of America, said that the total size of the crude oil reserves released by the United States was higher than previously expected by the market, but a large part of them were short-term exchanges and needed to be returned, which somewhat reduced the impact of this policy
.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, said the plan to release crude oil reserves was already widely known in the market and therefore reflected in market prices
.
And as traders locked in profits before the end of the year, positions in crude oil futures varieties have decreased significantly over the past few weeks, which has also reduced the market's
reaction to the news.

Phil Flynn, senior market analyst at the U.
S.
Price Futures Group, believes that releasing crude oil reserves will only have a short-term impact
on oil prices.

Analysts believe that the trend of the epidemic in the later period and whether oil-producing countries respond to the release of crude oil reserves will determine the next direction
of oil prices.

Haworth said the impact of the release of strategic crude reserves will be modest, the market will remain focused on the direction of demand, and the U.
S.
Department of Transportation data shows that U.
S.
air passenger data remains strong
.
He believes that the rebound in the number of new coronavirus infections and the reimposition of lockdown measures in Europe are unlikely to significantly affect market demand, and the recent increase in new crown infections has not yet had a lasting impact
on oil demand.

Howorth said that if the joint release of crude oil reserves brings oil prices below last week's lows, OPEC and non-OPEC producers are likely to consider taking action on this, but based on the market performance on the day, OPEC and non-OPEC producers may take a wait-and-see attitude
.

Croft said that while OPEC and non-OPEC producers are still expected to maintain their current production policy at their regular monthly meeting next week, it cannot be completely ruled out that Saudi Arabia will push to reduce the month-to-month increase in existing production in response to the joint release of crude oil reserves by consumer countries
.
However, fearing political pressure from the United States, several Gulf states with close ties to the United States are likely to oppose the move
.

Austria's JBC Energy Consultancy said OPEC had reserved the option
to suspend supply increases in the initial production deal.
Amid concerns about lower oil demand, major producers may delay raising crude supply
.
Unless OPEC and non-OPEC producers completely cancel plans to gradually increase supply, oil prices are expected to gradually fall
next year.