An upsurge in demand in the past quarter led to the biggest draw on oil products stocks in eight years, the IEA said, while storage levels in OECD countries were at their lowest since early 2015
China, the world's largest crude importer, was non-committal about its intentions to release oil from its reserves as requested by the United States, while OPEC producers were not considering changing tactics in light of the U.S. action, according to three sources in the group.
On Tuesday, U.S. President Joe Biden's administration announced plans to release millions of barrels of oil from strategic reserves in coordination with other large consuming nations, including China, Japan and India, to try to cool prices.
The United States has made the largest commitment for a reserves release at 50 million barrels of pre-approved sales along with loans to the market, but without China, the action is considered less dramatic.
On Wednesday, China said it was working on its own reserves release. The announcement confirmed a Reuters report last week that China was working on its own timeline.
On Tuesday, Biden had told a briefing China "may do more." Crude oil prices had been falling for several days on rumors of a coordinated action, but
oil prices jumped 3% on Tuesday as Washington tapped its strategic reserve but the market lacked clarity on China's intentions.
Washington's move raised speculation that the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, might consider pausing its current agreement to boost output by 400,000 barrels per day every month, but the group is not considering that, three sources told Reuters.
Fuel demand cratered early in the pandemic but has come roaring back this year, and oil prices have surged. Biden, facing low approval ratings ahead of next year's congressional elections, has grown frustrated at OPEC+ shrugging off his repeated requests to pump more oil. Retail U.S. gasoline prices are up more than 60% in the last year, the fastest rate of increase since 2000.
On Wednesday, Brent crude settled down 6 cents to $82.25 a barrel after a 3.3% increase on Tuesday. The contract had fallen 10% in the days prior to the news
on rumors of a coordinated release.
"The market seems to believe in OPEC+ to keep oil balances tight more than it believes in the transitory nature of an SPR release," said Rystad Senior Oil Markets Analyst Louise Dickson on Wednesday.
OPEC+, which includes Saudi Arabia and other U.S. allies in the Gulf as well as Russia, has rebuffed requests so far to pump more. It meets again on Dec. 2 to discuss policy but has so far not indicated it will change tack.
The group is monitoring whether oil markets are balanced, Iraq's oil minister Ihsan Abdul Jabbar said on Wednesday, saying the group still needs to study the latest data before making decisions about supply.
The group has been struggling to meet existing targets under its agreement to gradually increase production and remains worried that a resurgence of coronavirus cases could again drive down demand.
Washington's effort to team up with major Asian economies to lower energy prices was a warning to OPEC+ to control crude prices that are up more than 50% so far this year.
In the past, multi-country releases from reserves have been coordinated by the International
Energy Agency (IEA), a Paris-based watchdog. The IEA does not intervene to influence prices, but the head of the agency said Wednesday some producers have been restricting supply too much.
"Some of the key strains in today's markets may be considered artificial tightness ... because in oil markets today we see close to 6 million barrels per day in spare production capacity lies with the key producers, OPEC+ countries," said Fatih Birol, IEA head.
Under the plan, the United States will release 50 million barrels, the equivalent of about 2-1/2 days of domestic demand.
However, some analysts called the structure of the U.S. release - a combination of 18 million barrels of pre-approved sales and a loan of 32 million barrels - too small and temporary.
Goldman Sachs said the volume announced was "a drop in the ocean".
It was the first time the United States has coordinated such a move with some of the world's largest Asian oil consumers, officials said. India plans to release 5 million barrels and Japan "a few hundred thousand kilolitres" of oil from its national reserve. South Korea has not provided any details of its plans.
(Reporting by Yew Lun Tian in Beijing, Ahmad Ghaddar and Noah Browning in London, Olesya Astakhova in Moscow)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
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