Oil slips on fears of a rising surplus in the first quarter by Reuters

© Reuters. FILE PHOTO: An oil tanker waits in line in the ocean outside the Long Beach-Port port complex in Los Angeles, amid the coronavirus (COVID-19) pandemic, in Los Angeles, California, US, April 7, 2021. REUTERS/Lucy Nicholson / image file

By Florence Tan

SINGAPORE (Reuters) – Oil prices fell more than 1 percent on Friday, on fears that global oversupply could swell in the first quarter after a coordinated release of crude reserves among major consumers led by the United States.

Futures extended their decline for the third session, falling 96 cents, or 1.2%, to $81.26 a barrel by 0130 GMT. US West Texas Intermediate crude fell $1.35, or 1.7 percent, to $77.04 a barrel. No settlement was reached on WTI on Thursday due to the Thanksgiving holiday.

The administration of US President Joe Biden announced, on Tuesday, plans to release millions of barrels of oil from strategic reserves in coordination with other large consuming countries, including China, India and Japan, to try to calm prices.

An OPEC source said that such a statement is likely to inflate supplies in the coming months, according to the findings of a panel of experts advising ministers of the Organization of the Petroleum Exporting Countries (OPEC).

An OPEC source said the Economic Commission’s Council expects a surplus of 400,000 bpd in December, expanding to 2.3 million bpd in January and 3.7 million bpd in February if consuming countries go ahead.

Expectations of a higher oil surplus hang over the prospect of a meeting between OPEC and its allies, in a group known as OPEC+, on December 2 to decide on immediate production. The group is scheduled to decide whether to continue to increase production by 400,000 barrels per day in January.

However, benchmark contracts are set to post their first weekly gain in nearly a month as the total volume of crude oil reserve issuance, estimated at 70 million to 80 million barrels, was lower than market participants had expected.

“Since the volume is small, I think it is aimed at easing supply tightness, rather than significantly affecting oil markets,” Japan Petroleum Association president Tsutomu Sugimori told reporters late Thursday.

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