Home Business International oil prices hit a six-week low, and the U.S. reserve dumping decree has expanded, but fears go against its expectations. FX678

International oil prices hit a six-week low, and the U.S. reserve dumping decree has expanded, but fears go against its expectations. FX678

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International oil prices hit a six-week low, and the U.S. reserve dumping order has expanded, but fears go against expectations.

On Thursday (November 18), international oil prices expanded their decline to more than 1%, hitting a six-week low, and continuing their overnight decline. Therefore, there have been reports that the United States requires large crude oil consumers to consider coordinating the release of oil reserves to reduce oil prices.

At 16:01 Beijing time, NYMEX crude oil futures fell 1.35% to US$76.50/barrel; ICE Brent crude oil futures fell 1.14% to US$79.36/barrel. The two cities both set new lows since October 7, reaching US$76.44/barrel and US$79.28/barrel respectively.

The two cities hit more than 2.5% overnight, far from the multi-year high set last month. The U.S. government asked other countries to release reserves at a time when inflationary pressures partly driven by soaring energy prices began to have a political impact. Although the International Energy Agency and OPEC have stated in recent weeks that there will be more supplies in the coming months.

The global oil industry has been slow to respond to the surge in demand in 2021, leading to soaring global energy costs and inflationary pressures. With the economic recovery and the resumption of road, rail and air travel, global oil demand has returned to levels close to pre-epidemic levels.

But supply has not recovered so quickly, so in order to keep up with demand, the industry is using inventory. The United States and allies have coordinated the release of strategic oil reserves before, for example during the Libyan War in 2011. Libya is a member of OPEC.

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An official from Japan’s Ministry of Industry and Commerce said that the United States has requested the Tokyo authorities to cooperate in response to rising oil prices, but he could not confirm whether the request includes a coordinated release of stocks. The official said that according to the law, Japan cannot release oil reserves to lower prices.

A South Korean official also confirmed that the U.S. has asked the Seoul authorities to release some of its oil reserves. “We are thoroughly reviewing U.S. requirements, but we will not release oil reserves because of rising oil prices. We can release oil reserves when there is an imbalance between supply and demand. But not in response to rising oil prices.”

However, energy consulting firm FGE warned that oil inventories in developed countries are at a six-year low, and the balance of supply and demand in the oil market may not change quickly. “Although prices may fall from the peak last month, the current low inventory situation, This leaves oil prices at risk of soaring in the next few months.”

Citigroup analysts report: “If the US government orders the release of strategic reserves, this may send a strong political signal, but domestic refineries are unlikely to benefit from additional benefits, because light oil production seems to have reached its limit.”

They refer to the profit from the production of gasoline and other automobile fuels. Moreover, US crude oil producers are reluctant to overspend on drilling. Prior to this, they had already been “punished” by investors for being heavily indebted for new drilling.

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The latest report from the U.S. Energy Information Administration (EIA) stated that U.S. crude oil inventories unexpectedly fell last week. As of November 12, crude oil inventories fell by 2.101 million barrels, and analysts had expected an increase of 1.2 million barrels. The refinery increased production before the winter heating season, and rising fuel prices also increased the refinery’s profit margins.

Last week, refineries began to process more crude oil and exports increased, indicating that demand for U.S. oil is generally strong. Although the United States has released more than 3 million barrels of crude oil from its strategic reserves for two consecutive weeks, as the Biden administration seeks to reduce overall fuel costs, crude oil inventories are still reduced.

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