On Nov. 17, the crude oil futures were lower during the mid-morning trade in the market of Asia. Concerns of a supply shortage have lessened recently due to expectations of increased US shale production and reports that the US has asked China to release its oil reserves.
At 0324 GMT, the ICE January Brent futures contract had declined by 63 cents per barrel, or 0.76% from the previous price of $81.80 per barrel, while the NYMEX December light sweet crude contract had a 67 or 0.83% cents per barrel decline to $80.09 per each barrel.
Following the monthly Oil Market Report release by the International Energy Agency late Nov. 16, oil prices fell slightly as support from a tight supply outlook wore out. This release highlighted the role that the post-hurricane rises in US shale production played in meeting recovering demand. This rising oil production was partly due to high and increasing oil prices.
Even though the global oil market is tight by all measures, the analysis claims that a break in the price bubble could be on the way. The bubble burst is not because demand is dropping but because supply is on an uprising trend.
The monthly Drilling Productivity Report from the US Energy Information Administration came on Nov. 15. This report provided more support for the expectation of rising shale production. The original predictions for growth in this production are 85,000 b/d increase from November to December, the largest of which is likely from the Permian basin.
Outlook on the oil market
Furthermore, media reports that the US has asked China to release its oil reserves to help stabilize high crude oil prices. This request showed that the continuing economic talks between the two nations had increased estimations of a supply increase. Warren Patterson, an ING analyst, said on Nov. 17 that this factor can be the reason for the downturn of the prices today. However, we need to wait longer and see if there’ll be a joint release of SPR. However, it is crucial to keep in mind that the release of SPR will only be a short-term solution.
After the OPEC+ alliance continued to ignore the demands for loosening the oil output taps at their November meeting, the US government has been experimenting with the possibility of releasing its strategic petroleum reserves. However, it has yet to make an official decision.