Japan, Germany release Oil reserves ahead of IEA decision, WTI drops
- Japan announces the release of strategic Oil reserves ahead of a formal International Energy Agency decision.
- Germany is also preparing to release part of its reserves, according to local media reports.
- The International Energy Agency is expected to issue a recommendation on reserve releases later today.
According to Reuters, the International Energy Agency (IEA) is set to announce a recommendation regarding the potential release of emergency Oil reserves at 13:00 GMT. The move comes as governments seek to ease pressure on energy markets and contain rising fuel costs.
Japan has already confirmed it will begin releasing part of its strategic reserves as early as March 16. Prime Minister Sanae Takaichi stated that Tokyo intends to act even before a formal decision from the International Energy Agency (IEA). The plan includes releasing the equivalent of fifteen days of private-sector Oil reserves and around one month of state-held reserves.
Meanwhile, Germany is also preparing to release part of its Oil reserves, according to a report from German news agency DPA, reinforcing expectations of a coordinated international effort to stabilize the market.
Market reaction
West Texas Intermediate (WTI) US Oil reversed course following these announcements. At the time of writing, the price of WTI is down 1.50% on the day, trading around $84 per barrel.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.