Connect with us

Business

Will The Global Effort To Ease The Oil Price Rally Pay Off – OilPrice.com

Published

 on



Will The Global Effort To Ease The Oil Price Rally Pay Off? | OilPrice.com


Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

More Info

Trending Discussions

Premium Content

  • The Biden administration has been scrambling to avoid releasing oil from the U.S. strategic petroleum reserve, but the President and his team seem to have run out of options.
  • The U.S., along with Asian superpowers, China, Japan, and India, have all agreed to open the taps.
  • Oil producers have expressed concern that ramping up oil supplies could lead to a crash in the near future, though the true impact of this unprecedented move remains to be seen.

Storage

For weeks, the Biden administration has been doing everything possible to avoid releasing oil from the United States strategic reserve in an attempt to dampen out-of-control oil and gas prices. President Biden has pleaded with OPEC+ to open the taps and urged The Federal Trade Commission to open a federal investigation into whether domestic oil and gas companies have acted illegally to keep prices high at the pumps at the expense of U.S. consumers. 

So far, nothing has worked. Gasoline prices continue to climb even as the cost of production falls, and the Biden administration is scrambling to save face. Finally, this week, Biden threw in the towel and authorized the opening of the strategic oil reserves that he struggled so hard to avoid — but he’s bringing key Asian economic and geopolitical powers on board as well. 

“Today, the President is announcing that the Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply,” the White House said on Tuesday. 32 million of these barrels will be part of an exchange — though they are being extracted now as an emergency relief measure, they will be returned to strategic oil reserves in full over the next several years when oil prices are projected to level off. 

Biden has been extremely reluctant to compromise the United States’ energy security in any way, but he has leaned hard on his most prized skill set — international relations and complex diplomatic negotiations — to lessen the blow and level the playing field.

[embedded content]

“As a result of President Biden’s leadership and our diplomatic efforts, this release will be taken in parallel with other major energy consuming nations including China, India, Japan, Republic of Korea and the United Kingdom,” the White House went on to say. “This culminates weeks of consultations with countries around the world, and we are already seeing the effect of this work on oil prices. Over the last several weeks as reports of this work became public, oil prices are down nearly 10 percent.”

The coordinated announcements from China, India, Japan, South Korea and the UK all referenced the need to control global oil markets and an imperative for international cooperation (all of the nations of OPEC+ notwithstanding) to do so. Biden has already been mocked for his decision which does not guarantee any meaningful relief from sticker shock at the gas pumps and which, furthermore, seems at odds or even hypocritical when viewed in the context of this month’s COP26 climate pledges. 

China, which usually is highly secretive and protective of its unknown quantities of reserved oil (reported to be around 37.7 million tons in 2017), will be releasing a — you guessed it — undisclosed amount of oil. China, which historically bases all of its energy decisions around energy security and independence, clearly sees a release from their coveted reserves as a fair trade-off for a strong, if nascent, alliance against OPEC. 

Japan, for its part, had 388 million barrels of total strategic crude oil stocks as of June 2020, and will also be releasing an unspecified quantity in the “hundreds of thousands of kiloliters of crude oil” in a move that “marks an extraordinary moment for resource-poor Japan,” according to reporting from the Japan Times. Japan, which has strong laws mandating certain levels of oil stockpiling, sees such a release as a last resort. There have only been five such releases in the nation’s history, taking place after such emergencies as the Gulf War and 2011’s devastating earthquake and tsunami. 

India, which is an energy-strapped nation under the best of circumstances, has also agreed to release 5 million barrels. The Indian government directly points to OPEC as the reason for their cooperation in the coordinated release, citing “concern at supply of oil being artificially adjusted below demand levels by oil producing countries.” 

The actual impact of this oil release on global markets remains to be seen. Oil producers have expressed concern that ramping up oil supplies could lead to a crash in the near future. But it seems clear that Biden and his coordinated release alliance seem willing to take this risk in exchange for some geopolitical leverage against OPEC+.

By Haley Zaremba for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today


Back to homepage

<!–

Trending Discussions

–>



Related posts

Adblock test (Why?)



Source link

Continue Reading

Business

U.S. stock futures rise following Friday's omicron-sparked selloff – MarketWatch

Published

 on


U.S. stock futures rose late Sunday, following a steep selloff Friday sparked by fears of the global economic impact of a worrisome new strain of COVID-19.

Dow Jones Industrial Average futures
YM00,
+0.70%

gained about 230 points, or 0.7%, as of 9 p.m. Eastern. S&P 500 futures
ES00,
+0.92%

and Nasdaq-100 futures
NQ00,
+1.14%

also showed solid gains.

Crude oil futures also rebounded Sunday from a Friday plunge, with benchmark U.S. crude
CLF22,
+5.24%

and Brent crude
BRNF22,
+4.70%
,
the international benchmark, jumping roughly 4% higher.

On Friday, Wall Street suffered its worst day in more than a year amid growing concerns over the new omicron variant of COVID-19. The World Health Organization’s technical advisory group on Friday declared it a “variant of concern,” and a number of countries imposed flight bans from countries in southern Africa, where the variant was first discovered.

Little is known about omicron, but investors Friday braced for bad news.

Read: U.S. health officials urge caution, but not panic, over omicron variant

In a holiday-shortened session, the Dow Jones Industrial Average
DJIA,
-2.53%

slumped 905.04 points, or 2.5%, to 34,899.34, with the index logging its worst daily drop since Oct. 28, 2020, according to FactSet data. The S&P 500 
SPX,
-2.27%

 fell 106.84 points, or 2.3%, to 4,594.62, and the Nasdaq Composite Index
COMP,
-2.23%

 sank 353.57 points, or 2.2%, to 15,491.66.

“The pandemic and COVID variants remain one of the biggest risks to markets, and are likely to continue to inject volatility over the next year(s),” Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, wrote in a Friday note. “It’s hard to say at this point how lasting or impactful this latest variant will be for markets.”

Adblock test (Why?)



Source link

Continue Reading

Business

Canada to Tap Maple Syrup Reserves to Combat Supply Crisis – TMZ

Published

 on


Adblock test (Why?)



Source link

Continue Reading

Business

Canadians to get biggest drop in gasoline prices since 2009 over COVID variant fears – Yahoo Canada Finance

Published

 on


Canadians should experience the fastest drop in gasoline prices in nearly 13 years on Sunday as fears about a virulent new COVID-19 variant are expected to provide a break of 11 cents per litre at the pumps.

Dan McTeague, president of Canadians for Affordable Energy, said the national average price could drop to about $1.32 per litre but begin to rise again midweek.

“(Sunday) represents the single largest decrease at the pumps we’ve seen going back to 2009,” he said in an interview.

Global crude oil prices plunged Friday over fears about a new COVID-19 variant called Omicron that prompted Canada to ban entry for foreign nationals who travelled through southern Africa.

The January crude oil contract fell 13.1 per cent or US$10.24 on Friday and currently stands at US$68.15 per barrel.

The decrease came as U.S. stock markets closed early Friday because of the Thanksgiving holiday.

“Sunday and Monday are going to be the best days for Canadians to fill up, including British Columbia,” McTeague said

Even residents of flood-ravaged B.C. will save on the province’s high gasoline prices despite facing rationing because severe flooding has shut both the Trans Mountain pipeline and the province’s lone refinery.

Drivers of non-essential vehicles can only purchase up to 30 litres per visit to a gas station in the Lower Mainland, Sunshine Coast, Sea to Sky area, Gulf Islands and Vancouver Island.

East Coast residents won’t reap the immediate benefits of Sunday’s price drop because its regulated regional system averages price movements. That provides price predictability but blunts price discounts.

Despite the upcoming decrease, national gasoline prices have surged nearly 43 per cent in the past year as the reopening of the global economy from pandemic lockdowns prompted a recovery in crude prices.

McTeague suggested Canadians shouldn’t get too comfortable with the energy savings. He said prices are expectd to increase as OPEC and its allies, who are meeting on Monday, will likely refuse to increase production any further. Energy traders realize that Friday’s decrease was overdone and “flies in the face of fundamentals,” he added.

“My sense is that the decreases that we saw were a little exaggerated and overbought, and for that reason I think we might see a little bit more balance come back to the markets and fundamentals by Wednesday,” McTeague said.

“Unless there’s further unsettling news of greater and further lockdowns, I would expect that oil prices are probably going to recover US$3 to US$4 a barrel by Monday or Tuesday, which means by Wednesday or Thursday we could be looking at increases in the order of four or five cents a litre.”

McTeague said some gasoline savings will continue for a couple of weeks, but he foresees crude climbing back to about US$90 a barrel, which would translate into prices in Canada exceeding $1.50 per litre.

Impending carbon tax increases will further boost prices.

A tax of 2.5 cents per litre, including HST, will take effect on April 1, 2022. It will be followed in December by the clear fuel standard that will add another 18.1 cents per litre including HST, said McTeague.

Adding to the inflation pressure is the Canadian dollar which is less valuable than when it was at par the last time crude prices were around US$80. That reduces the purchasing power for all kinds of products, including energy and food.

The Canadian Automobile Association said that as of early Saturday morning, Manitoba had the lowest average pump price of $1.35/L, followed closely by Alberta at $1.377, while Newfoundland and Labrador was the highest at $1.583 with British Columbia at $1.558.

This report by The Canadian Press was first published Nov. 27, 2021.

Ross Marowits, The Canadian Press

Adblock test (Why?)



Source link

Continue Reading

Trending