The impact of the SALE of U.S. reserves on oil prices may be limited to short-term market bullish sentiment

2022-09-14 0 By

Did the massive release of strategic oil reserves, spearheaded by the U.S. government, derail the oil price rally?According to the price chart of WTI crude and cloth futures, the answer is yes, the release of strategic reserves does restrain oil prices from rising in the short term to some extent.WTI crude and oil futures have both fallen more than 7% since the U.S. government announced its strategic reserve release plan last week.The U.S. government plans to release 1 million barrels of oil a day for six months, setting the stage for a U.S. energy supply independent of foreign suppliers, President Joe Biden said Thursday, calling it the largest release of oil reserves in U.S. history.He also said he expected U.S. Allies to release as much as 50 million barrels of oil from their own stockpiles.Zhitong Finance APP observed that the latest data showed that the crude oil market is still in backwardation, a bullish market structure in which the near-term price is higher than the forward price.But WTI crude briefly fell back below $100 and cloth oil fell below $105, and the time spread data showed that supply concerns had eased.The six-month spread for WTI crude was $7.05 a barrel at Friday’s close, compared with $13.46 last Wednesday, before the US announcement.The spread of Brent crude, the global benchmark, also narrowed sharply.However, it briefly traded at about $7.82 a barrel this afternoon.The latest move in oil futures suggests some easing of fears of supply shortages since the White House said it would release 1 million barrels a day of oil reserves for six months, but it is far from the end of the market.Goldman Sachs said in its latest forecast that it expects Brent crude to reach $125 a barrel by year-end, despite the COVID-19 pandemic and record release of the Strategic Petroleum Reserve.At the same time, Goldman sachs raised its 2023 oil price forecast to $115 a barrel from $110.Goldman sachs said a strategic reserve release on that scale, which would increase supply by 1 million barrels a day over six months, would help rebalance the oil market in 2022.Goldman slightly raised its brent price forecast for the second half of 2022 to $125 a barrel, while saying: “This will not address the structural supply deficit, which will take years.”The move comes after Goldman Sachs cut its second-half 2022 Brent forecast to $120 per barrel in late March.”In fact, lower oil prices in 2022 will support demand for crude oil while slowing the acceleration of shale oil production, resulting in a temporary deficit in 2023 and likely requiring the U.S. government to lead the release of strategic reserves,” Goldman added.Goldman sachs said.As a result, Goldman sachs predicts that the U.S. move could boost Brent prices by $5 / BBL in 2023, or $115 / BBL, up from the bank’s current $110 / BBL forecast for the year, reflecting higher market demand and lower shale supply in 2022.Current projections compiled by S&P Global Commodities Insights suggest that Brent spot prices will average $120 / BBL in Q2 2022, before slowly easing back to average $100 / BBL by year-end.Vitol, one of the world’s largest independent oil traders, said yesterday that prices did not fully reflect Russian supply risks and the level of global demand, but were more like a game between commodity traders.”Given the risk of supply disruptions from Russia, prices could be higher, but people still can’t put numbers on it,” Mike Muller, Head of Vitol Asia, said in an interview.By the third quarter, Muller said, Russia’s crude oil and petroleum products output, which normally exports about 7.5 million barrels a day, could fall by 1 million to 3 million barrels a day.This article is from Zhitong Financial network