By Yuka Obayashi

TOKYO (Reuters – Oil prices declined on Wednesday due to the U.S.-led coordinated withdrawal of stocks from strategic reserve. Investors took profit from yesterday’s rally before the U.S. holiday of Thanksgiving.

U.S. West Texas Intermediate crude oil futures (WTI), fell 0.2% to $78.38 per barrel at 0122 GMT. This reversed a gain of 2.3% the day before.

After rising 3.3% on Tuesday, futures dropped 32 cents (or 0.4%) to $81.99/barrel.

“The combined efforts of oil-consuming nations to lower crude prices led to fresh selling,” stated Kazuhiko Sako, chief analysts at Fujitomi Securities Co Ltd.

He said that profit-taking is behind the U.S holiday and concerns about slower European demand due to the resurgence of the COVID-19 pandemic were also contributing factors.

According to the United States, it released millions of barrels of crude oil from its strategic reserves Tuesday in cooperation with Japan, South Korea (India), South Korea, Japan, and Britain to help cool prices following repeated refusals by OPEC+ members to increase their production.

The newspaper reports that Japan will conduct auctions to sell approximately 4.2 Million barrels of oil taken from its national stockpile.

According to Tuesday’s American Petroleum Institute data, gasoline inventories rose while distillate inventories dropped, adding to the pressure.

The crude oil stocks increased by 2.3million barrels during the week ending Nov. 19, compared to analysts’ expectations of a decrease by around 500,000 barrels. The data revealed that gasoline inventories increased by 600,000. barrels while distillate stocks decreased by 1.5 million barrels.

Analysts still believe the effects of the coordinated release on prices will be limited after many years of decline in investment and an international recovery from COVID-19.

Analysts from Goldman Sachs (NYSE 🙂 estimated that this coordinated release will add between 70 and 80 million barrels of crude oil to the global supply. It is smaller than what the market had been pricing in at more than 100 million barrels.

Louise Dickson (senior oil markets analyst, Rystad Energy), stated in a report that “the threat of increased supply in the near term certain creates an artificially looser crude oil market over the next 1-2 months period.”

He said that the U.S. president and others may have just been pushing down the supply problem’s timeline. Emptying storage would put more strain on oil stocks already at low levels.