Oil prices continue to rise after US release reserves

·3 min read
Petroleum, petrodollar and crude oil concept : Pump jack and a black barrel on US USD dollar notes, depicts the money received or earned from sales after investment in the development of oil industry.
Oil is potentially on track to test its October highs once again at around $85 a barrel, as the US dips into its reserves to release more oil and meet demand. Photo:Getty

Oil prices continued to rise on Wednesday after the US said it was releasing 50 million barrels of oil from its reserves in an attempt to bring down rising energy and petrol prices.

Brent Crude (BZ=F) was up 0.5% on the day at $82.56 (£61.82) per barrel, extending a 3.3% rise on Tuesday, which was its biggest percentage gain since August.

It is currently potentially on track to test its October highs once again at around $85 a barrel.

The move also pushed oil giants BP (BP.L) and Royal Dutch Shell (RDSA.L) higher, which in turn helped to lift the energy sector and the FTSE 100 (^FTSE) to a one-week high.

Oil prices are still at highs. Chart: Yahoo Finance
Oil prices are still at highs. Chart: Yahoo Finance

It came as the US announced that it would be releasing 50 million barrels of oil from the Strategic Petroleum Reserve, with the move occurring alongside similar decisions in China, India, Japan, South Korea and the UK.

Some 32 million of those 50 million barrels will be an exchange, where oil is released over the next few months that is then returned over the coming years. Meanwhile another 18 million are coming from an acceleration of an oil sale that Congress had already authorised.

In a statement the White House said: "American consumers are feeling the impact of elevated gas prices at the pump and in their home heating bills, and American businesses are, too, because oil supply has not kept up with demand.

"That's why President Biden is using every tool available to him to work to lower prices and address the lack of supply."

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The rise in oil came in part because the contribution from other nations was smaller than economists had expected.

The decision from US president Joe Biden to release 50 million barrels from December was sharply below what was anticipated, and has been criticised as not going far enough to address the imbalance between demand and supply.

“Oil prices continued to be under the spotlight as a US-led release of oil from strategic reserves failed to dampen commodity price inflation,” Russ Mould, investment director at AJ Bell, said.

“Strategic reserves are meant to be untouched unless there is a real shortage of oil, and there is certainly no emergency at present. Governments shouldn’t be dipping into them to try and control the market price. Also, the amount released is very small in the bigger scheme of things."

He added: “The move might suggest that governments are prepared to release more reserves, which could send a message to the oil market that extra supplies could be available at the click of a finger which could cap any large increases in the oil price temporarily.”

Biden has repeatedly asked the Organisation of the Petroleum Exporting Countries (OPEC) group of oil-producing nations to boost output more rapidly. However, OPEC has stuck to an agreement to only increase production gradually.

Watch: U.S. to Tap into 50M Barrels of Reserve Oil to Tame Rising Gas Prices

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