Oil rose today, paring a weekly decline, as investors assessed China’s confirmation that it had released crude from its strategic reserves in an unprecedented intervention in the global market.
West Texas Intermediate for October delivery climbed $1.15 to US$69.29/bbl as of 9:54 a.m. in London. Brent for November settlement rose $1.21 to $72.66, after losing 1.6 per cent on Thursday.
Beijing tapped its giant reserves “to ease the pressure of rising raw material prices,” according to an announcement from the National Food and Strategic Reserves Administration. It didn’t give further details, but people familiar with the matter said the statement referred to millions of barrels of oil that were offered to domestic refineries in July.
Some analysts see the move as a precursor to ramping up purchases later to make up for depleted stockpiles. Releasing stocks “for the first time can be seen as bullish as it’s in preparation for the demand bump in 4Q,” analytics firm Oilytics said in a report. Inventories “will have to be eventually replaced so demand is just getting deferred,” it said.
Despite the uncertainty caused by China’s move, crude in New York has traded in a $4 band since late August. The market has been pulled in different directions with majority of Gulf of Mexico production still shut from Hurricane Ida and falling American stockpiles acting as bullish triggers, countered by the ever-present pandemic.
Friday’s price move reflects some “buying back following the overreaction yesterday, amid ongoing support from supply disruptions,” said Giovanni Staunovo, commodity analyst at UBS Group AG.
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