The market was expecting the news, and traders may have been disappointed when they saw the details, said Claudio Galimberti, senior vice president of oil markets at Rystad Energy.
“The problem is that everyone knows this measure is temporary,” said Galimberti. “So once it is stopped, if the demand continues to be greater than the supply as it is now, you are back to square one.”
Shortly after the US announcement, India announced that it would release 5 million barrels from its strategic reserves. The UK government has confirmed it will release up to 1.5 million barrels from its stockpile. Japan and South Korea are also participating, and US officials have said it is the largest coordinated release of global strategic reserves.
British Prime Minister Boris Johnson’s spokesman Max Blain said it was “a sensible and measured move to support global markets” during the pandemic recovery. Blain added that companies nationwide will be allowed but not required to participate in the post.
Despite all the optimistic statements, the actions of the United States and others risk countering the measures of the Gulf countries, especially Saudi Arabia, and Russia. Saudi Arabia and other Gulf countries have made it clear that they intend to control supply to keep prices high for now.
As word spread in recent days of an upcoming joint withdrawal from reserves by the United States and other countries, warnings have been issued by OPEC interests that these countries could react in turn, reneging on their promises to increase supplies in the months to come.