Oil may not need SPR release to go lower

Speculation over an emergency release of U.S. oil reserves has grown, but the market may not even need one to lower prices.

Just talk of  a potential Strategic Petroleum Reserve release was blamed for the dramatic price drop late in Monday’s session, which saw oil fall more than $4 a barrel in about 20 minutes before rebounding to close 2.4% lower. On Tuesday, oil for October delivery was trading at $96.21 a barrel on the New York Mercantile Exchange, down 41 cents.

“Oil prices are likely to fall back without the need for the release of emergency reserves as optimism about the impact of global policy stimulus fades and demand remains weak,” said Julian Jessop, head of commodities research at Capital Economics.

If prices don’t decline, the U.S. would probably release reserves outside the framework of the International Energy Agency, he said in a note.

Via – MarketWatch

BCO/USD H1

The White House mentioned that “all options remain on the table” to bring down oil prices if necessary. This together with increased Saudi Arabian output brought prices back to Monday lows, which is acting as a strong resistance against further declines. However, bearish pressure is building up with oil given up all its gains post QE3 announcement, something that is not observed in any other risk correlated assets across equities indices and commodities. As the overall mood of the market is still relatively bullish, Crude bears may need to wait for official SPR release for the next leg down.

 

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