Oil Suffers Worst Decline Since July with Covid, Potential Reserve Releases Weighing on Sentiment
Oil, WTI, US-China Relations, OPEC+, Strategic Petroleum Reserve – Talking Points
- West Texas Intermediate set to post largest single-day decline since July 19th
- Covid resurgence in Europe, strategic reserve releases weighing on market
WTI looks set to post its largest single-day decline since July as Europe struggles with Covid outbreaks and rumors continue to swirl over potential releases from strategic oil reserves. Europe appears to be experiencing another wave of infections, as Austria became the first country in western Europe to reinstate widespread Covid lockdowns. Should other advanced economies in the Eurozone follow suit, the region’s economic recovery may be called into question.
In a meeting with President Xi of China, U.S. President Joe Biden discussed a tactical and coordinated release of oil from the strategic petroleum reserves of both countries, a move that has helped cool prices in recent weeks. While China has explicitly said it is working on a plan to tap into its strategic reserves, the U.S. has simply maintained that “the option remains on the table.”
WTI Daily Chart
Chart created with TradingView
Contrary to the wishes of President Joe Biden, OPEC+ has stuck by its policy of gradual supply increases of 400,000 barrels per day until the end of 2022. After failing to persuade the group to abandon its cautious approach to restoring supply, President Biden pivoted to potentially using America’s Strategic Petroleum Reserve. Oil may suffer further pain, as potential supply increases could combine with deteriorating demand stemming from a resurgence in Covid cases to create a “perfect storm” for lower prices.
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--- Written by Brendan Fagan, Intern
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.