Bulls are wished to be drown in reserves

Alexey Gromov, Principal Director on Energy Studies at the Institute for Energy and Finance, commented on the Oil and Capital Internet portal regarding the impact on the world oil market of the US President's decision to sell part of the country's strategic oil reserve.

Alexei Gromov explained that the Biden’s administration is going to sell off strategic reserves to improve the president's image inside the country, since ordinary Americans are unhappy with the rise in prices at gas stations: “This beautiful gesture with the sale of strategic reserves should have a positive effect on image of the president. The fact that the United States was able to attract other importers of crude oil to this initiative will have an even more positive effect on his image. This is the American president's concern for his own people,” the expert noted. In his opinion, this decision will be primarily symbolic for the market:

“Nobody will sell large volumes of oil from strategic reserves. Since these reserves are intended to prevent problems with fuel supply,” Gromov emphasized.

Alexey Gromov is confident that the next step after the sale of strategic reserves could be a change in the position of the OPEC + countries:

“If by December 2 the OPEC + countries see that importers have taken such a step, they can accelerate the recovery of oil production. That is, there will be a symbolic gesture of selling the strategic reserve, I doubt that significant volumes will be sold. But this gesture will affect the mood of the players and in the short term on oil prices. If OPEC + revises the parameters of the deal, then this will have a much more significant effect on the market. Prices will stabilize and slightly adjust downward, at least to the level of $ 70 per barrel,” the expert said.

Alexey Gromov noted that oil production in the United States actually recovered to pre-crisis levels: “In 2022, there may be new production records. But given the strong recovery in the global market in 2021, the effect of shale, which was previously very significant, did not happen. Let me remind you that 2020 turned out to be a disastrous year in terms of investments in oil production around the world. Such investment failures lead to the fact that the supply of oil is reduced, and it will not be possible to restore it overnight. Therefore, no matter how the American shale industry recovers, the decline in production in other regions of the world and the OPEC + agreement had a more serious impact on the market, "the expert summed up.