Following the spectacular failure of the SPR release, which instead of depressing prices ratcheted them up higher, renewed COVID-19 concerns have now brought about President Biden’s objective.
OPEC+ might still have a say in this, with the group's December 02 meeting, potentially resulting in a reduction in production targets for 2022.
Despite repeated talks with the US government, China has pushed back against President Biden’s calls to “do more” and stated it would coordinate its own releases of strategic stocks according to its needs, cooling down the enthusiasm of market bears.
OPEC expects a release of oil stocks by majors consumers to significantly increase a global glut in the next few months, an OPEC source said, just over a week before a meeting to decide immediate output policy.
The outlook might complicate decision-making for the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, although several sources said there has been no discussion yet on pausing planned production increases.
OPEC's Economic Commission Board (ECB), a panel of experts that advises ministers, met this week ahead of the OPEC+ ministerial meeting on December 02. The ECB expects the oil release to swell a surplus in the oil market by 1.1 million barrels per day (bpd). OPEC has warned in recent days of the expected supply excess in remaining days of 2021.
It expects a 400,000 bpd surplus in December 2021, expanding to 2.3 million bpd in January 2022 and 3.7 million bpd in February if consumer nations go ahead with the release, the source said.
On Tuesday, US President Joe Biden's administration said it would release 50 million barrels of oil from strategic reserves in coordination with smaller releases from Britain, China, India, South Korea and Japan, to try to cool prices after OPEC+ ignored calls to pump more.
Biden was frustrated after OPEC+ shrugged off his repeated requests to pump more oil. Retail US gasoline prices are up more than 60% in the last year, the fastest rate of increase since 2000.
Goldman Sachs estimated the total size of the release at 70 million or 80 million barrels, less than one day's worth of global consumption, describing it as a "a drop in the ocean".
OPEC+ has been increasing output targets by 400,000 bpd every month since August, saying those volumes were sufficient because of the expected oil market surplus next year.
Some market analysts, including JP Morgan, have suggested OPEC could slow down output increases after the release of stocks by major consumers.
OPEC+ has not yet started any discussions on a planned output hike in January 2022 and Iraq's oil minister said on Thursday OPEC+ should stick to its existing plan.
