This month has been a roller-coaster for OIL.WTI.
From $81 a barrel on November 4th to more than $85 on November 9th and then falling again to $78. As a Crude oil trader, you likely have faced multiple contradicting demand and supply signals during this time. Let's try and make sense of all this.
Rumors on Crude oil reserve release
In the past few days, the decline of Crude oil prices has been driven by the growing talks of the United States releasing some of its Crude oil's reserves to cool down the prices despite the looming threat of a drop in demand due to the faltering Covid-19 cases, more so in Europe.
According to Reuters, China, India, and South Korea are also on board, making the effect more imminent. At the same time, Japan, the fourth-largest oil consumer, is considering requesting a coordinated release of its petroleum reserves to tackle the hike in prices.
Despite the spike in prices, OPEC+, which consists of Saudi Arabia, other U.S. allies, and Russia, has refused to pump more Crude oil. The organization is set to meet again on December 2nd to discuss future policies but has so far shown no indication of changing its decision.
Moreover, the looming threat of lockdowns in Europe, particularly Eastern Europe, could result in a drop in the demand for road and jet fuel from 8.1 million BPD (barrels per day) as of October to 7.9 million BPD. While this may appear to be a normal drop in this time frame, releasing Crude oil reserves from major consumers may result in more volatility.
A green day for OIL.WTI despite the news
Despite the news that the U.S and other countries plan to release over 50 million barrels of Crude oil in an attempt to control petrol prices, OIL.WTI is still enjoying a broad rally on Tuesday (23'rd November 2021).
Watch out for potential volatility next week
According to John Kolovos, chief technical strategist at Macro Risk Advisors, an actual release of the Crude oil reserve would only have a temporary impact and act as an opportunity for traders to buy in at lower prices.
Anyhow, an increased volatility in Crude oil prices may be expected as the U.S. prepares whether or not to tap its reserves and as the world awaits the OPEC meeting on December 2nd, 2021.