In a report published by “Oil Price” (oil priceThe American writer, Irina Slough, says that President Biden’s announcement earlier this week that the US government would release 50 million barrels of crude oil from the strategic reserve was primarily aimed at reducing oil prices, but prices rose on the ground, which could push “OPEC Plus” countries to reduce the volume of their supplies.
The writer believes that the sudden decline in oil prices last Friday was caused by the escalation of fears of a new Covid-19 wave, and not Biden’s announcement of the release of part of the country’s strategic oil reserves.
Energy experts warn that the release of the strategic reserve may not have the desired effect, as OPEC countries can withhold more oil from the market, in larger quantities than the United States and its allies will release.
Analysts confirm that the crude oil that the United States is preparing to release is of the sour type that is not globally preferred, because it requires a large amount of processing to reduce the level of sulfur, a process that usually requires natural gas, whose prices have risen significantly recently, and analysts are warning at the moment that the price of Brent crude to $100.
“It won’t work because no country’s strategic oil reserves are there to influence prices,” Stephen Schork, founder and editor of The Schork Report, told CNBC. “We expect the price of a barrel of oil to reach $100,” he added.
“Certainly, OPEC and the Saudis can win this confrontation because they hold all the trump cards,” says John Kilduff, co-founder of Again Capital. The price of West Texas Intermediate crude is below $70, at which time OPEC Plus can respond.”
The US plan includes selling 32 million barrels of strategic petroleum reserves between late December and next April, with an additional 18 million barrels being sold in the coming months.
Meanwhile, OPEC is preparing for a worst-case scenario, which involves releasing 66 million barrels between January and February. Sources from OPEC told “Argos” that most members do not see any need to amend the original agreement, which stipulates raising production by 400,000 barrels per day, as there is a provision to stop production temporarily for a period of 3 months.
OPEC countries represent 40% of global crude oil production, while the United States provides about 18.6%, and Russia 12%, so the OPEC countries with Russia provide half of the world’s oil production, and will be the winning party in any confrontation, according to observers.
The writer adds that the decline in prices during the past days due to the new South African strain (Omicron) of the Corona virus will likely not last for a long time.
The “CNBC” network quoted the Executive Director of the International Energy Agency, Fatih Birol, as saying that the factor that “caused the rise in prices is the failure of some major oil and gas suppliers to take an effective position in this regard.”
He added, “Some pressures in the markets today can be considered an artificial restriction, because we see in the oil market today nearly 6 million barrels per day of spare production capacity that falls on the shoulders of the main producers, i.e. the OPEC Plus countries.”
The agency has worked in recent years to support efforts to shift towards non-polluting energies, and earlier this year called for the suspension of all new oil investments, but recently urged producers to increase production.
For its part, the “OPEC Plus” countries have so far rejected all calls to increase production, stressing that they will defend their interests before the interests of any other party, and it is expected – according to the writer – that the upcoming “OPEC Plus” meeting will bring more bad news to major oil consumers, and more. from the rise in oil prices.
It is noteworthy that oil prices rose today, Monday, as investors searched for profitable deals after their decline last Friday, and due to speculation that the “OPEC Plus” gathering may stop the increase in oil production in light of the spread of the Omicron strain of the Corona virus.
According to Reuters, prices have jumped more than 4%, making up for some losses after falling more than 10% in the previous session.