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SPR Release Only Triggered A Brief Selloff In Crude Oil – OilPrice.com

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SPR Release Only Triggered A Brief Selloff In Crude Oil | OilPrice.com


Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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  • President Joe Biden has been scrambling to put a lid on runaway oil prices over the past month.
  • Biden’s latest plan is a joint strategic oil reserve release, cooperating with the likes of China, India, and Japan. 
  • OPEC+ has drawn a line in the sand, saying that if there is an orchestrated attempt to release strategic reserves, it will tighten supply.

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Media reports about the joint release of millions of barrels of oil by the United States, China, and Japan prompted a selloff across oil futures contracts and a decline in benchmarks over the last week. However, the trend reversed this week when OPEC+ suggested that it might tighten supply in response to the release.

The reserve release idea came from the White House, which has been scrambling to find a way to rein in retail fuel prices amid rising inflation. According to the reports, President Biden approached the governments of China, India, Japan, and South Korea with the suggestion they release oil from their strategic reserves jointly in a signal to OPEC that large consumers can also move prices, just like large producers.

Initially, the prospects of the concerted release of oil were dim, but then China announced it was preparing for a new oil tender that would offer crude from its strategic reserve. Then Japan said it had found a way to release crude from its strategic reserve legally.

The country had an issue with the legality of such a move as law states oil from the strategic reserve could only be released in times of shortage or in case of a natural disaster, neither of which applies now. However, according to a Bloomberg report from earlier today, a draw from the reserve was legal if it was made from surplus supply.

Initially, India was against the move, saying it would not have the desired effect, but according to the latest update on the topic from Bloomberg, which cited unnamed sources, the government in New Delhi was discussing the timing of the reserve release and the coordination with other large consumers.

The U.S. itself announced a release from the Strategic Petroleum Reserve today. And it was a substantial release at 50 million barrels released over several months, according to a White House press release.

Even “a 35-million barrel release from the U.S. would be significant,” according to Warren Patterson, head of commodities strategy at ING Groep. “Once you consider potential volumes from others, we are looking at something pretty substantial. The risk of further Covid related restrictions this winter and potential SPR releases might be enough to persuade OPEC+ to pause supply increases.”

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While large oil consumers confronted OPEC with reserve releases, hedge funds went on a selling spree, according to Reuters’ John Kemp. Funds sold 34 million barrels of West Texas Intermediate and 18 million barrels of Brent crude last week, out of a total 57 million barrels sold across the six most traded crude and oil product contracts.

As a result of this selloff, oil prices have been on the decline lately, especially as concern about demand in some parts of the world such as Europe has been rekindled by the latest flare-ups of Covid infections even in countries with a high vaccination rate such as Denmark. This, in turn, has added weight to OPEC’s argument about the uncertainty of demand in the coming months and the suggestion that it might need to reconsider its decision to add 400,000 bpd to its combined monthly production. This, done in response to the collective reserve release of crude, will likely push oil prices even higher despite the demand concerns.

“The battle lines are being drawn,” said John Kilduff, founding partner at Again Capital, as quoted by Bloomberg.  “Certainly, OPEC and the Saudis can win this in that they are holding all the cards. They can keep more oil off the market than a SPR release can put on the market. If you see WTI get under $70, then I would expect a response from OPEC+.”

By Irina Slav for Oilprice.com

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Bank of Canada keeps key interest rate on hold – CTV News

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OTTAWA –

Canada’s central bank has sent a warning that increases in the cost of living would continue into next year, but signalled it wasn’t yet prepared to pull its key lever to rein in inflation.

The annual pace of inflation in October rose to 4.7 per cent, a pandemic-era high and the fastest year-over-year gain in the consumer price index in 18 years.

The Bank of Canada said high inflation rates will continue through the first half of next year, but should by the second half of 2022 fall back to its comfort zone of between one and three per cent.

By the end of next year, the bank is forecasting the annual inflation rate to fall to 2.1 per cent.

While the path for inflation and the economy are largely following the central bank’s expectations, the statement released Wednesday said the bank “is closely watching inflation expectations and labour costs” to make sure they don’t take off and cause a spiral of price growth.

The comments in the last scheduled rate announcement of the year left the key rate at its rock-bottom level of 0.25 per cent, unchanged from where it was in January at the onset of the COVID-19 pandemic.

The announcement also said that the bank doesn’t expect to raise the trendsetting rate until some time between April and September next year, which is unchanged from its previous guidance.

“Overall, the (Bank of Canada) did indeed resist spitting in anyone’s holiday ‘nog,” Derek Holt, head of capital markets economics at Scotiabank, wrote in a note. “They stayed on track with guidance to begin entertaining rate hikes as soon as next April.”

When the bank moves, it is likely to move fast and furious, said BMO chief economist Douglas Porter. The bank has a history of quickly raising rates from emergency levels, he said, suggesting four rate hikes by the end of 2022.

“When the Bank of Canada believes that interest rates need to go up, they don’t tend to wait around, they tend to move relatively quickly,” Porter said.

The bank said the economy appears to have “considerable momentum” heading to the end of the year after growing at an annualized rate of 5.4 per cent in the third quarter of the year, a hair below what the Bank of Canada forecasted in October.

The Bank of Canada’s statement noted that the quarterly growth brought total economic activity to within about 1.5 per cent of where it was in the last quarter of 2019, before COVID-19 washed upon Canada’s shores.

Similarly, the labour market had a stronger-than-expected showing in November, pushing the share of core-age workers with a job to an all-time high and leaving the unemployment rate 0.3 percentage points above its pre-pandemic level in February 2020.

Still, the bank notes headwinds from devastating floods in British Columbia and uncertainties from the Omicron variant that could throw another wrench into snarled supply chains, and scare off consumers from spending on services.

TD senior economist Sri Thanabalasingam said the bank may move sooner on rates if Omicron proves to be less of a health concern than initially feared, noting the economy can handle it “with inflation running hot, and the labour market on solid footing.”

A rise in rates would impact interest charged for variable rate mortgages, which could tighten the finances of households that over the course of 2021 have added $121.5 billion in mortgage debt, including $38 billion between July and September.

“It’s going to be, I think, particularly problematic for Canadians who have gone into fairly substantial mortgages, particularly when interest rates have been low for such a long period of time,” said Tashia Batstone, president of FP Canada, a financial-planning association.

“What that means is you have to work harder to stick to your budget, you have to be watching the debt that you’re taking on, and in particular watch that you may not be able to have the flexibility around mortgage loans.”

This report by The Canadian Press was first published Dec. 8, 2021.

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Pfizer says COVID-19 booster offers protection against Omicron – CTV News

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Pfizer said Wednesday that a booster dose of its COVID-19 vaccine may protect against the new Omicron variant even though the initial two doses appear significantly less effective.

Pfizer and its partner BioNTech said lab tests showed a booster dose increased by 25-fold the level of so-called neutralizing antibodies against omicron.

Pfizer announced the preliminary laboratory data in a press release and it hasn’t yet undergone scientific review. The companies already are working to create an omicron-specific vaccine in case it’s needed.

Scientists have speculated that the high jump in antibodies that comes with a third dose of COVID-19 vaccines might be enough to counter any decrease in effectiveness.

Antibody levels predict how well a vaccine may prevent infection with the coronavirus but they are just one layer of the immune system’s defences. Pfizer said two doses of the vaccine may still induce protection against severe disease.

“Although two doses of the vaccine may still offer protection against severe disease caused by the Omicron strain, it’s clear from these preliminary data that protection is maximized with a third dose of our vaccine,” Pfizer CEO Albert Bourla said in a statement.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content

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Ontario COVID-19 science advisor recommends tighter restrictions in Thunder Bay – Tbnewswatch.com

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THUNDER BAY — A leading Ontario epidemiologist believes the Thunder Bay District Health Unit should take measures immediately to mitigate the further spread of COVID-19.

“The trajectory is in the wrong direction. At this rate, they will start to be challenged” with managing the situation, says Dr. Peter Juni.

Juni is the scientific director of the province’s COVID-19 science advisory table.

The COVID-19 caseload has been rising steadily in the Thunder Bay area since mid-November, including cases at numerous schools.

The 54 new cases reported on Monday was the largest number of new cases reported since March 17, 2021.

It brought the active case count to 137, including some cases of the new Omicron variant.

The risk for TBDHU, Juni said, is that “You can’t just get contact tracing, testing and management done as efficiently as before….Omicron pops up now, and you potentially have a problem.”

He said although the challenges presented by the new variant aren’t fully known yet, it needs to be taken very seriously.

It’s why, Juni said, he recommends swift action to slow the spread of the Delta variant while simultaneously preventing Omicron from becoming dominant.

“If I were in the shoes of the local public health unit, and the medical officer of health, I would really follow the same sort of decision-making that Windsor-Essex has just had,” he told TBNewswatch on Monday.

The Windsor-Essex County Health Unit announced Sunday that it is introducing new measures that go beyond current provincial regulations.

In its service area, where the rate of COVID-19 infections is starting to put a strain on local hospitals, the following restrictions will take effect on Dec. 10:

  • social gatherings limited to 10 people indoors and 25 outdoors
  • added measures for wedding receptions and for social events tied to funerals and religious services
  • limiting indoor capacity for bars and restaurants to 50 % of their usual occupancy limit
  • strict adherence to face-covering requirements in all public settings

“The virus loves indoor spaces. It hasn’t changed for Delta and it won’t change for Omicron either,” Dr. Juni said.

He said it’s also essential that people “don’t cut corners with masking.”

At sports venues specifically, he said, he would seriously consider disallowing the consumption of food and drink in order to keep masks in place.

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