Florence Tan

SINGAPORE (Reuters – Oil prices dropped more than 1% last Friday, citing concerns that a global shortage could increase in the first quarter after a coordinated release by crude reserves between major buyers led US.

Futures continued to decline for the third session. They fell 96cs or 1.2% to $81.26 per barrel at 0130 GMT. U.S. West Texas Intermediate crude oil (WTI), was at $77.04 per barrel, down 1.7% or $1.35. WTI was not settled on Thursday due to Thanksgiving holiday.

U.S. President Joe Biden declared Tuesday that he would release millions of barrels oil from his strategic reserves. This was in coordination with large consuming countries like Japan, India, China and China to help cool down prices.

According to the conclusions of a panel of expert advisors to ministers of the Organization of the Petroleum Exporting Countries, such a release could increase supplies over the next months.

The Economic Commission Board, (ECB), expects a surplus of 400,000 barrels per day (bpd), which will grow to 2.3 million bpd by January, and 3.7 millions bpd by February if the releases are approved by consumer countries, according to an OPEC source.

Rising surplus oil forecasts cloud the prospects of the meeting between OPEC/allies on Dec. 2, to decide on immediate production. This group will determine if it will increase its output by an additional 400,000 bpd during January.

The benchmark contracts will still see their first weekly gains in almost a month, despite the fact that the volume of crude reserve releases (estimated at 70 to 80 million barrels) was lower than anticipated by market participants.

Tsutomu Suzumori, the president of the Petroleum Association of Japan, said that the volume was small and is not intended to have a significant impact on the oil market.