Oil Rises As All Eyes On Washington Following OPEC Rebuff

But one trader says the U.S.'s SPR solution won't do much to lower pump prices: File Image/Pixabay

With all eyes on what U.S. president Joe Biden will (or won't) do in the wake of the Organization of the Petroleum Exporting Countries' (OPEC) refusal to boost output and alleviate crude prices, vigorous oil trading on Friday pared another weekly loss for the commodity to 2.8 percent.

West Texas Intermediate rose $2.46 to settle at $81.27 per barrel, while Brent added $2.20 to settle at $82.74 per barrel.

Trading rose sharply late in the session after Saudi Arabia, OPEC's de facto leader, boosted the official selling price of all the kingdom's crudes to buyers globally (which implies, contrary to OPEC's stated fears that pandemic resurgence could ruin demand, that the Saudis see demand improving).

Saudi Aramco increased pricing for its key Arab Light grade of crude for customers in Asia in December by $1.40 to $2.70.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, remarked, "The key focus for the market right now remains the U.S.'s response to the OPEC+ meeting yesterday."

Indeed, on Friday U.S. energy secretary Jennifer Granholm said Washington is examining the feasibility of releasing barrels from the Strategic Petroleum Reserve.

However, the notion that this strategy will be successful is not universally shared within analytical circles: a trader told Bloomberg on Friday that considering the Biden administration likely has the ability to release a maximum of 60 million barrels, that's a little more than three days' worth of average U.S. consumption, based on 2020 levels – and a much hoped-for reduction in prices at the pump simply won't happen to any meaningful degree.

Regardless of what Washington does, the only likely scenario in the weeks and months ahead is that higher oil prices will continue: that was the sentiment expressed on Friday by Amrita Sen, director of research at Energy Aspects, who said the united front presented by OPEC and its allies following its Thursday meeting is significant because it was a signal that "'We are doing what's right for the oil market'."

Sen defended OPEC's stance by stating that "oil prices have has gone up the least compared to gas and coal" due to it being regulated by the cartel; she also pointed out that "We ultimately need more investment in the upstream that gives us more supply – and that's not coming."