Oil steadies around $80 after US taps emergency reserves
Oil prices steadied near $80 a barrel on Tuesday after the United States announced plans to release up to 50 million barrels of oil from its reserves to cool the market.
The release of strategic reserves was made in concert with other such moves by China, India, South Korea, Japan and Great Britain, the White House said, as major consumer nations battle against rising inflation.
But analysts said the effect on prices is likely to be shortlived after years of declining investment and a strong global recovery from the COVID-19 pandemic.
Brent crude futures were up 53 cents, or 0.66%, at $80.23 a barrel by 1352 GMT after earlier dropping as low as $78.55. U.S. West Texas Intermediate (WTI) crude futures were up 22 cents, or 0.29%, at $76.97.
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U.S. President Joe Biden's administration said the release of 50 million barrels from the U.S. Strategic Petroleum Reserves (SPR) will start hitting the market in mid to late December.
India also announced the release of 5 million barrels of oil from its strategic reserves while South Korea and Britain also confirmed they would participate.
Although the 50 million barrel release by the United States was above market expectations, 18 million barrels had already had already been planned for sale, said UBS analyst Giovanni Staunovo.
"Big headline number but the details provide a less strong narrative," Staunovo said.
"SPR releases are a tool used to cover temporary production disruptions and are not useful to fix imbalances caused by lack of investment and still rising demand."
The OPEC+ alliance between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia has so far rebuffed repeated requests from Washington to pump more oil.
The United Arab Emirates Energy Minister Suhail Al-Mazrouei on Tuesday said that the UAE sees "no logic" in increasing its own contributions to global markets at the moment, adding that technical data gathered ahead of an upcoming OPEC+ meeting in December pointed to an oil surplus in the first quarter of 2022.
Eurasia Group analyst Henning Gloystein said that "the developments point to a period of heightened political tensions between the world's biggest consumers and OPEC+, which implies increased oil price volatility".
Prices had dropped below $80 a barrel from a three-year high of more than $86 on Oct. 25 amid talks of a coordinated release and potential hit to energy demand from a fourth wave of COVID-19 cases in Europe.