Oil prices continue to drift lower as market prices in potential strategic oil reserve releases. It is said that the United States, Japan, South Korea, India and China may release a total of 120 million barrels of oil to ease fuel prices for consumers. It is rumoured that SPR release may be announced during Biden’s speech today (7:00 pm GMT) Meanwhile, OPEC+ members like Russia or Saudi Arabia stick to their narrative and say that demand drop at the turn of 2021 and 2022 looks highly likely, especially after European countries started to reimpose pandemic restrictions. As a result, OPEC warned that it may reconsider whether to continue with output increases at its next meeting. Release of strategic reserves will only have a short-term impact on the market. One should not forget that strategic reserves will need to be refilled so releasing them now will mean that countries will need to purchase more oil soon. On the other hand, should OPEC+ decide not to increase production, it may have a longer-lasting effect on prices.
A look at Brent chart (OIL) shows that oil price has dropped over 10% over the past month. OIL dropped to $77.30 yesterday in the afternoon and attempted to recover later on. However, advance was halted way ahead of the upper limit of the local market geometry. Unless we see a break above this hurdle in the $80 area, continuation of the downward move looks to be the base case scenario. The near-term support to watch can be found ranging around $77.00.