According to Bloomberg News, has the massive strategic reserve release of the United States broke the oil’s rally? A quick look at the curve of the crude’s futures would indeed suggest the same that it has.
Oil continues to be in backwardation. A bullish market structure wherein near-dated costs are expensive compared to those further out. However, it is eased to the levels closer to the levels where they earlier existed before the invasion of Russia of Ukraine started causing doldrums in the market.
Release of pressure
For the West Texas Intermediate, the six-month time spread was $6.15 per barrel at 10.17 am on Monday, as per London time, compared to $7.05 per barrel on Friday end of the day, and $13.46 on Wednesday’s close before the United States made the announcement. For the global benchmark, a similar spread Brent crude was found to narrow down sharply.
Bloomberg News reports that redrawing the curve implies that the market is not as anxious as it used to be for fear of supply shortfalls since the White House announced that it would release 1 million barrels per day of oil for six months from its reserves.
However, this move has not been convincing for everyone, and the prices will not surge again. Oil has dropped to levels that do not reflect the risks of any more disruptions to Russian exports, as per Vitol Group, the biggest independent crude trader in the world.
