Oil prices slump as supplies grow less than expected
By Daniel Tyson
19:34, 17 November 2021
Oil futures fell Wednesday afternoon as investors waited to see if the Biden administration taps emergency reserves in a coordinated move with nations such as China, and a report shows a smaller than anticipated build in oil inventories.
West Texas Intermediate (WTI) was down 3.3% to $78.13 a barrel at 14:00 ET (UTC-5). European Brent crude dropped to $80.14, down 2.8%. Natural gas continued the downward trend by slumping more than 6% to $4.84 per million cubic feet.
US motorists will not be seeing relief at the pump soon, even as gasoline dropped more than 2.6% to $2.28 a gallon. As wintry weather descends on North America heating oil was down more than 2.6% to $2.37 per gallon.
However, analysts told Capital.com over the last few days the price declines are a lull, as prices will return to highs soon.
Biden weighs in
US President Joe Biden’s administration has hinted at releasing oil from the Strategic Petroleum Reserve (SPR) to help ease gasoline prices. But the analysts told Capital.com opening the SPR would be a short-term fix, not a solution to a global problem.
Another avenue the administration explored is asking China to increase its releases. The topic came up earlier this week in a meeting between Biden and President Xi Jinping, the South China Morning Post reported, citing an unidentified source. By Thursday afternoon Beijing hadn't announced any specific plans but said it’s open to Biden’s request.
During the nearly four-hour virtual summit between the two presidents, a plethora of issues were covered, including energy security. The US asked China to release oil reserves as part of talks on economic cooperation, the newspaper reported. The talks were an extension of a conversation between US Secretary of State Antony Blinken and China’s Foreign Minister Wang Yi.
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On Tuesday, the American Petroleum Institute (API) reported some positive numbers showing that US crude supply increased by 655,00 barrels the week before. That was smaller than anticipated and should include a 3 million barrel plus release from the Strategic Petroleum Reserve, analysts told Capital.com
Meanwhile, Energy Information Administration (EIA) data showed for the week ending 12 November, that crude oil was down 2.1 million barrels to 433m barrels compared to the week before and 56.5 million barrels during the same time last year.
The API found a 491,00 barrel drop in Cushing, Oklahoma, a holding hub for WTI, hitting a three-year low after dropping for the past five weeks.
With prices temporarily on a downward slope from last month's seven-year high, analysts are trying to figure out crude’s path into next year. The International Energy Agency said earlier this week demand growth will remain healthy, while supply is catching up.
Meanwhile, OPEC+, Organization of Petroleum Exporting Countries, said a surplus may soon emerge as the rebound from the pandemic falters. This wasn’t enough for the cartel to increase its 400,000 barrel a day output until the summer of 2022. However, Andrew Lipow, president of Lipow Oil Associates, told Capitol.com earlier this week, OPEC is only producing an extra 200,000 barrels a day, as some African nations' dated infrastructure is struggling with the increased demand.