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Oil hovers above six-week low as China readies crude reserve release

Prices fell to the six-week lows early in the session as China said it was moving to tap reserves

Crude Oil Price | Oil production | China

Reuters  |  NEW YORK 

Crude oil, Brent Crude

Oil prices rose slightly on Thursday, bouncing after a drop to six-week lows as investors wondered about how much crude major economies would release from their strategic reserves and how much that would ease global crude demand pressures.

Prices fell to the six-week lows early in the session as said it was moving to tap reserves. On Wednesday, Reuters reported that the United States was asking large consuming nations to consider a stockpile release to lower prices.

Washington's bid to cool markets, asking to join a coordinated action for the first time, comes as high gasoline prices and other inflationary pressures have sparked a political backlash.

"Japan and South Korea have shown resistance to releasing reserves, so we're coming back up a little bit," said Phil Flynn, Senior Analyst at Price Futures Group in Chicago. "The market is going to continue to be nervous, because it is on guard from a release."

Brent crude was up 53 cents, or 0.7%, at $80.81 a barrel at 11:55 ET (1655 GMT). The session low of $79.28 was the lowest since Oct. 7. U.S. West Texas Intermediate crude futures were up 18 cents at $78.54 a barrel. It also fell during the session to the lowest since early last month at $77.08.

A release, even if only from the U.S. and China, will likely drive prices lower at least temporarily.

In October, prices hit seven-year highs as the market focused on the swift rebound in demand as more people received COVID-19 vaccinations and lockdowns were lifted.

Prices rallied as demand rose and the Organization of the Petroleum Exporting Countries (OPEC) and its allies, called OPEC+, decided to raise output only slowly.

The Energy Agency and OPEC have said more supply will be available in coming months, but Washington has pressed for a speedier pace.

The proposed release of reserves represents an unprecedented challenge to OPEC, because it involves top importer

China's state reserve bureau said it was working on a release of crude reserves although it declined to comment on the U.S. request.

A Japanese industry ministry official said the United States had requested Tokyo's cooperation in dealing with higher oil prices. but that Japan by law cannot use reserve releases to lower prices.

A South Korean official said it was reviewing the U.S. request for Seoul to release some oil reserves, but added it could only release crude in case of a supply imbalance.

(Additional reporting by Aaron Sheldrick and Noah BrowningEditing by Peter Graff, Elaine Hardcastle, Kirsten Donovan and David Gregorio)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Fri, November 19 2021. 01:36 IST