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Oil rises sharply after the US decision to sell shares
Prices for Brent crude on Tuesday rose to a maximum in three months, adding more than 3%
Nov 24, 2021
1 min read
Anna BakkerNews analyzer

Traders reacted with purchases to the US decision to intervene in the oil market by selling off part of its strategic reserves.

US President Joe Biden on Tuesday announced 50 million barrels of oil will be spun off from strategic reserves in the next few months. Market deliveries will take place in January-April 2022, not earlier than the end of December.

The White House stressed that, together with the United States, a number of other countries, including India, Great Britain, China, South Korea and Japan, will release part of the oil from their reserves, TASS reports.

Former US President Trump criticized Biden's decision to use US oil reserves, saying they were only intended for use in emergencies such as war.

The goal of the White House's plans was to further reduce the cost of raw materials (quotations fell by 10% from the October highs) due to the introduction of additional volumes to the market. Apparently, market participants were disappointed by the amount of oil that the parties to the agreement decided to sell, says Lenta.

The sale of 50 million barrels of oil from strategic US reserves, announced on November 23 by Biden, has already been won back by the market. According to Saxo Bank, further reduction of these measures is ineffective.

The sale of oil from the reserves of a number of countries will have little effect on its price and will have a short-term effect, Rystad Energy believes.

Sales account for only half of the world's daily oil consumption and will stretch over time. It is possible that OPEC + will respond to the United States by suspending its plans to increase production.

Bloomberg said on Monday that the alliance countries are ready to revise their current plans to gradually increase oil production in the event of a coordinated implementation of strategic reserves.

“In the long term, there are many downside risks to oil supply and demand. At the same time, oil prices may remain high for many more years until alternative energy becomes more efficient and reliable, ”the GravityPlus analyst team notes.

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