Crude Oil Slumped Following Reserve Release

Crude oil failed to hold its grounds above $78 on Thursday, while falling back to its $76 per barrel during Friday’s early Asian trading session. The commodity had been falling from its 2014 highs near $85 per barrel since late October, while set to end its four consecutive weekly losses this week.

Latest sell-off pressure came amid US suggestion to major oil importing countries such as China, Japan and India, in releasing their oil reserves under the Strategic Petroleum Reserve (SPR) to lower down global oil prices. The US Department of Energy launched an auction to sell 32M barrels of oil from the SPR for domestic usage, while plans for another additional 18M barrels are underway.

The surge in oil price since April last year contributed to rising global inflationary levels, as the global economy continues to recover from the pandemic’s impact. In an attempt to cool prices, Washington urged OPEC and its allies into increasing their production, however, the oil cartel did not cave into demands.

Since then, the US had been coordinating with other major oil importers such as China, Japan, and India to release their oil reserves. According to analysts, a coordinated release could contribute an additional 70-80 million barrels of crude oil supply into the market.

Investors will shift their focus over to the OPEC+ ministerial meeting on December 2 for further market signals. OPEC warned that releasing reserve could swell surplus in the market, and the cartel could consider pausing its gradual production increase to contradict the efforts from major oil importing nations.   

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From the technical front, crude oil in its H4 time-frame continues to be pressured by its downward trendline after a technical rebound towards the 23.6 Fibonacci level near 79.00. Oil price is currently testing its 38.2 Fibonacci support level near 76.00, where a successful breakout below suggests price to revisit its 50.0 Fibonacci level near 73.00.