Meanwhile, the analytical push to boost domestic output continues: File Image/Pixabay
Crude traders once again fell prey to the argument that demand recovery may be petering out, thanks to the disclosure that U.S. stockpiles increased 1.02 million barrels last week, the biggest build in three weeks – and as a result oil prices on Wednesday declined, but minimally, by 0.1 percent.
The decline was accompanied by more criticism over U.S. president Joe Biden's move to release 50 million barrels from its Strategic Petroleum Reserve: it was reported that the bulk of the barrels will be mostly sour, or high in sulphur, while the shortage problem the release was supposed to address pertains to sweet/low sulphur crude.
Meanwhile, the International Energy Agency on Wednesday accused the Organization of the Petroleum Exporting Countries (OPEC) and its allies of helping to create "artificial tightness" in the market by refusing to increase output as the U.S. and other countries had requested.
Daniel Haynes, commodity strategist, ANZ
The market is probably a little bit tighter than OPEC is insinuating
IEA executive director Fatih Birol said, "I very much hope to see that in their next meeting or meetings they take this situation into account and make the necessary steps in order to comfort the global oil market and help to bring prices down to reasonable levels."
Unsurprisingly, OPEC's view of the world market differs from that of the IEA's, and its Economic Commission Board on Wednesday argued that if the U.S. and other countries release 66 million barrels of oil over a two month period, the excess in world markets would expand by 1.1 million barrels per day (bpd) in January and February to 2.3 million and 3.7 million per day respectively.
These calculations presumably contributed to the sentiment of some OPEC delegates that the cartel should cancel an output hike scheduled for January.
Still, despite blips such as the rise in U.S. inventories, Daniel Haynes, commodity strategist at ANZ, told Bloomberg television on Wednesday that "the market is probably a little bit tighter than OPEC is insinuating" and echoed the sentiment of colleagues by suggesting a better strategy for the U.S. to achieve a reduction in prices at the pump would be to "encourage more supply" via boosting shale output.
Indeed, such a boost may be forthcoming despite the hoopla over the SPR: Baker Hughes data published on Wednesday showed that U.S. energy firms added oil and natural gas rigs for a record 16 months in a row thanks to high crude prices: in November the count gained 25, the biggest monthly increase since January, putting the total rig count up 249 rigs, or 78 percent, compared to this time last year.