Oil at 7-week low but under pressure as release of reserves considered by Reuters

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© Reuters. FILE PHOTO: A worker takes a sample of crude oil from an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS / Carlos Garcia Rawlins

By Florence Tan and Naveen Thukral

SINGAPORE (Reuters) – Oil prices hit their lowest in seven weeks on Monday, but remained under pressure after Japan announced it was weighing on the release of oil reserves and the COVID-19 situation in Europe has worsened, raising concerns about both oversupply and weak demand.

fell 14 cents, or 0.2%, to $ 78.75 a barrel at 0502 GMT and US West Texas Intermediate (WTI) crude futures fell 4 cents to $ 75.90 a barrel.

The market is on the move a bit as strategic oil reserve (SPR) releases are not yet fully valued, an oil trader in Singapore said.

WTI and Brent prices hit their lowest since October 1 earlier in the session. They fell about 3% on Friday, declining for the fourth week in a row for the first time since March 2020.

Japanese Prime Minister Fumio Kishida on Saturday said he was ready to help tackle soaring oil prices following a demand by the United States to release oil from its emergency stockpile, in an unprecedented move.

Tokyo is exploring ways to get around a law that allows the release of oil reserves only in the event of supply shortages or natural disasters.

The White House again urged the OPEC producer group on Friday to maintain adequate global supplies, days after US talks with some of the world’s largest economies over the possibility of releasing oil from strategic reserves to suppress high energy prices.

The combined release of SPR could be 100 to 120 million barrels or even more, Citi analysts said in a note dated Nov. 19. That includes 45-60 million barrels from the United States, about 30 million barrels from China, 5 million barrels. India and 10 million barrels each from Japan and South Korea, the bank estimated.

“If released in December and January, that could mean a loosening of the markets of around 1.5 to 2.0 mb / d. January 22 without any publication from SPR, ”Citi said.

Possible new lockdowns in Europe have further weighed on prices as COVID-19 cases have risen again. Germany warned on Friday that it may have to move to a full lockdown after Austria said it would re-impose strict measures to tackle the rise in infections.

The worsening COVID-19 situation in Europe and investor profit-taking towards the end of the year added to the uncertainties in the market, the trader said.

“The profit taking has turned into a rout on prices,” he said, adding that prices should move sideways until January before going up.

Fund managers reduced their net long positions in futures and options in the week to November 16, the U.S. Commodity Futures Trading Commission said on Friday.

Investors were also monitoring developments in the Middle East after Saudi state media reported Monday morning that the Saudi-led coalition fighting the Iranian-backed Houthi movement in Yemen said it detected indications of an imminent danger to navigation and world trade south of the Red Sea. Brent, Monthly WTI Crude Futures Price Spreads, https://fingfx.thomsonreuters.com/gfx/ce/gkplgdzokvb/Pasted%20image%201637549463985.png

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