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Oil steady above $82 despite plot of US and allies to boost supply

Oil price is rising Wednesday, the day after the unprecedented move by the US and its allies to mount a coordinated release of strategic reserves to expand supply and hold the price of oil down.

The US move is being been seen by oil traders as falling short of expectations and eyes are now on OPEC+ which has said it will respond to the US move.

The internationally traded benchmark crude grade Brent is steady above $82 a barrel while futures in New York traded above $78 a barrel after climbing 2.3% on Tuesday.

The U.S. will release 50 million barrels of crude from the Strategic Petroleum Reserve, with India adding another 5 million barrels from its emergency stockpiles and the U.K. contributing 1.5 million barrels. Announcements are also expected from China, Japan and South Korea, which together could add anywhere between 10 million and 20 million barrels.

Read Also: Oil prices spike as OPEC+ favours gradual production increase

Focus now turns to OPEC+ and how the group will respond to the move by some of its biggest customers after the alliance said prior to the announcement that a release is unjustified by current market conditions and that they may have to reconsider plans to add more supply at a monthly meeting next week.

According to Bloomberg, the OPEC+ group of oil producers would have to defer at least two months’ worth of planned output increases to offset strategic stockpile releases led by the U.S.

That won’t be a comfortable option for the countries involved, which have been steadily raising output targets since May, writes Bloomberg oil strategist Julian Lee.

OPEC+ producers previously warned that they would respond by delaying further output increases planned for January and beyond, or even by reversing increases that they made already. The group is due to hold discussions on Dec. 2 to set production plans for January.

To offset fully a release of 60 million barrels of crude from consumer stockpiles by the end of March, the producer group would have to forgo the 400,000 barrel-a-day output increases planned for both January and February.

That may be no hardship for those members — most notably Angola, Nigeria and Malaysia — that have struggled to keep up with their rising output targets.

But it would come as a blow to others, like Russia, where the upper house of parliament appears to be hoping for a quicker restoration of shut-in production.

OPEC already sees the oil market flipping from deficit to surplus as 2021 draws to a close, which means that President Biden may not need his SPR release to calm the market for long.

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