Oil prices turned down more than 3%, during trading on Friday, as Brent crude fell below $79, with the strength of the US currency.
Crude’s performance comes on the heels of the US’ call for major oil consumers for a coordinated release of strategic reserves.
Oil Prices Today
Brent crude futures prices – January 2022 delivery – decreased by 3.1%, recording $78.72 a barrel, after exceeding the level of $82 in trading. early .
The prices of West Texas Intermediate crude futures – for December delivery – also decreased by 3%, recording $76.62 a barrel.
The December contract for US crude expires on Friday, and most trading activity has shifted to January futures contracts.
Crude price fluctuations
Crude prices have turned lower, with the US dollar strengthening, making oil more expensive for holders of other currencies.
Oil prices experienced a volatile session Thursday, following a report that the United States asked China, Japan and other major buyers to join the issuance of crude oil stocks from the Strategic Petroleum Reserves.
Any issuance “will only provide a short-term fix for the structural deficit,” Goldman Sachs analysts said in a note.
They added that the move to supply the market with oil is now fully priced, noting that the issuance will not help in the slow global supply response that can only be overcome when oil prices rise.
Investors are betting that potential coordinated releases by major economies of their official crude reserves may have less impact on markets than expected.
Biden and OPEC +
The Biden administration’s push for a coordinated release of oil stocks is seen as a signal to the OPEC+ production group that it needs to ramp up production to address fears of rising fuel prices in the world’s largest economies, starting with the United States, China and Japan.
Brent crude is up nearly 60% this year, recently driven by a broader energy crisis as economies recover from the coronavirus pandemic, while the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have gradually raised daily production by 400,000 barrels. monthly.
The market structure of Brent crude is still lagging i.e. when spot prices are higher than the lagging futures, this usually indicates that demand for oil is higher than supply and prices are bullish.
However, the opposite trend has declined amid the volatility of the past two sessions, signaling the easing of market distress.
The spread in the price between the front-month Brent crude contract and the 6-month contract thereafter was $4.30 a barrel, down from an 8-year high of $6.30.
OPEC has maintained what analysts say are unprecedented production curbs, even as prices have rebounded from the depths of the early stages of the coronavirus pandemic.
Data showing that Saudi oil exports hit an 8-month high in September, rising for the fifth consecutive month, also helped keep prices in check.
However, commodity analysts at Fitch Solutions said, “The market remains fundamentally tight, however, and any volumes released are unlikely to significantly alter the global balance.”
Analysts expected any downside to prices to be limited in terms of volume and duration.