President Joe Biden is going to release crude from the nation’s oil reserves, in concert with other nations such as Britain, China, India, and Japan, in hopes of reversing surging energy prices. Good luck.
Indeed, word of the US-led initiative caused West Texas Intermediate (WTI) petroleum to drop over the weekend to near $75 from just under $80 per barrel. But Tuesday morning, amid doubts that the reserve releases would be sufficient, WTI nudged back up to around $78.
The Organization of the Petroleum Exporting Countries and their allies, chiefly Russia, (known as OPEC+) have responded that they may reduce their output to offset the oil tapped from the emergency storage banks. The White House this morning announced it was releasing 50 million barrels of oil from the Strategic Petroleum Reserve, which many analysts deemed too small to make any long-term difference.
To Edward Moya, senior market analyst at OANDA Global, “The response of the US and the others will prove to be insignificant. Crude will remain a volatile trade, but much of the downward move has already happened.”
Rising energy costs are a key component of the recent inflation surge, with the Consumer Price Index (CPI) rising 6.2% in October, over the previous 12 months. Oil prices reached a seven-year high last week. WTI topped $100 in 2014 and then it generally trended downward until this year.