Oil prices were largely steady on Wednesday as investors questioned the effectiveness of a U.S.-led release of oil from strategic reserves and turned their focus to how producers will respond. Brent crude settled down 6 cents, or 0.07%, at $82.25 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.14%, at $78.39.
The United States said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try to cool prices after OPEC+ ignored calls to pump more.
Japan will release "a few hundred thousand kilolitres" of oil from its national reserve, but timing has not been decided, its industry minister Koichi Hagiuda said on Wednesday.
Some countries have not taken a helpful position in terms of oil and gas prices, the head of the International Energy Agency said on Wednesday, saying not enough supply was reaching consumers.
Analysts said the effect on prices was likely to be short-lived after years of declining investment and a strong global recovery from the COVID-19 pandemic.
The coordinated release could add about 70 million to 80 million barrels of crude supply, smaller than the more than 100 million barrels the market has been pricing in, analysts at Goldman Sachs said.
"On our pricing model, such a release would be worth less than $2 a barrel, significantly less than the $8 a barrel sell-off that occurred since late October," the bank said in a note titled "a drop in the ocean".
U.S. crude stocks in the Strategic Petroleum Reserve fell last week to 604.5 million barrels, their lowest since June 2003.
JPMorgan Global Commodities Research said any impact on oil prices from the release of crude may not be sustained for long. The brokerage also expects global oil demand to surpass 2019 levels by March 2022.
While attention has now switched to how the Organization of the Petroleum Exporting Countries and its allies will react to the joint reserve release, sources said the group was not discussing pausing oil output increases for now.
The group is to hold two meetings next week to set policy, sources said.
Jeffrey Halley, senior market analyst at OANDA, said the move to tap storage was "a one-shot wonder and markets responded appropriately".
U.S. crude stockpiles rose 1 million barrels last week, the Energy Information Administration said, compared with analysts' expectations for a decrease of 481,000 barrels.
U.S. crude stocks in the Strategic Petroleum Reserve fell last week to 604.5 million barrels, their lowest since June 2003.
"While crude oil inventories built by 1 million barrels, crude oil inventories in the Strategic Petroleum Reserve dropped by 1.6 million barrels and along with continued declines in product inventories, I think this is supportive for prices," Andrew Lipow, president of Lipow Oil Associates, said.
The number of active U.S. oil rigs rose by six to 467 this week, the highest since April 2020, as higher crude prices have prompted some drillers to return to the wellpad.
Prices were also tempered by coronavirus infections that broke records in parts of Europe, prompting new curbs on movement.
