Crude Oil Drifts Lower as Market Waits for OPEC+ Response to Reserve Release

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By Geoffrey Smith -- Crude oil prices edged lower in depressed trade on Thursday as the market used the U.S. Thanksgiving Day holiday to take a breather ahead of next week’s key OPEC+ meeting.

By 5:10 AM ET (1010 GMT), U.S. crude futures were down 0.7% at $77.86 a barrel, while Brent crude, the international benchmark, was down 0.6% at $81.79 a barrel.

The OPEC+ group, which brings together the world’s largest exporters, is due to meet in a week’s time, on December 2nd, under pressure to respond to a coordinated signal from the world’s biggest buyers that prices are too high.

Speculation on a joint release of reserves had pushed prices to a seven-week low before Tuesday's announcement, and while prices have leaped by more than $2 since then, they're still some 8% off their October highs.

So far, the group hasn’t indicated any shift in its output policy, but the Organization of Petroleum Exporting Countries, which had already warned of the global market tipping back into surplus early next year, noted on Thursday that the planned release of strategic reserves by the U.S. and others would equate to a global supply increase of around 1 million barrels a day.

OPEC+ has pledged to restore the output it cut at the start of the pandemic in monthly increments of 400,000 barrels a day. In recent months, it has struggled to meet that commitment due to production difficulties in members such as Nigeria and Angola. Some now see that pledge as subject to review.

“The alliance…may opt to reduce future production hikes when they meet,” said Saxo Bank strategist Ole Hansen in a morning note to clients.

The U.S. intends to hold regular auctions of barrels from its Strategic Petroleum Reserve between January and April.

“The total stock release numbers could exceed 60-70 million barrels based on what we know now, which warrants attention on the drawdown rate of such a release,” said Rystad Energy oil market analyst Bjornar Tonhaugen in e-mailed comments.

There was only a modest reaction on Wednesday to weekly data from the U.S. government showing a 1 million barrel increase in commercial crude stocks last week, not least because inventories of gasoline and other fuels continue to fall, suggesting that final demand from airlines, drivers and chemicals companies is still robust.

Airlines in particular have increased available capacity to deal with pent-up demand on transatlantic routes, after the lifting of restrictions on visitors from the U.K. and EU allowed Americans in Europe to return home for Thanksgiving for the first time in two years.

Elsewhere, U.S. gasoline RBOB futures were likewise down 0.7% at $2.3035 a gallon. The U.S. government acknowledged that retail prices this Thanksgiving would be their highest in nine years.

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