Why oil prices jumped despite the U.S. tapping the Strategic Petroleum Reserve Oil futures rose sharply Tuesday after the Biden administration announced a coordinated, U.S.-led effort by energy consuming countries to release strategic crude reserves. What gives?
First off, a move had been well-telegraphed. News reports speculating on potential releases from the Strategic Petroleum Reserve and talk of a coordinated effort that would include China and others circulated in recent weeks, and were widely cited as a factor in crude oil’s pullback in price from 7-year highs set last month.
West Texas Intermediate crude for January delivery CL00, -0.48% CLF22, -0.48%, the U.S. benchmark, jumped $1.75, or 2.5%, to close at $78.50 a barrel. Global benchmark Brent crude BRN00, -0.16% BRNF22, -0.16% surged $2.61, or 3.3%, to $82.31 a barrel.
But there’s more to the bounce than traders simply fading a piece of long-anticipated news, analysts said.
The size of the U.S. release at 50 million barrels was larger than the 35 million barrels that had been widely anticipated, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. But details of the plan, including the use of swaps, which means oil purchased from the SPR must be returned in the next one to three years, may have blunted the impact somewhat, he said, in a phone interview.
“The reality is the impact is going to be modest and the story is still one of what is demand going to do,” Haworth said, noting that transportation data, including U.S. Transportation Security Administration airline passenger numbers, remain robust. ............
https://www.marketwatch.com/story/why-oil-prices-are-rising-after-the-u-s-leads-global-release-of-strategic-reserves-11637695714?mod=home-page
