Crude oil futures extend gains after 3% surge overnight on SPR release

Crude oil futures were higher in mid-morning trade in Asia Nov. 24, extending gains of more than 3% overnight, after major oil-consuming economies announced a smaller-than-expected release from their strategic petroleum reserves.

Some bearish pressures also came from an unexpected build in US crude oil and gasoline inventories last week.

At 10:23 am Singapore time (0223 GMT), the ICE January Brent futures contract was up 14 cents/b (0.17%) from the previous close at $82.45/b, while the NYMEX January light sweet crude contract was 25 cents/b (0.32%) higher at $78.75/b.

Oil prices continued to climb after settling 2.3%-3.3% higher overnight as investors deemed the scale of the SPR releases by several major oil-consuming economies insufficient to offset the current shortage of oil the world faces.

"Markets deemed the overall release of the strategic oil reserves to be too small to ease the demand-supply imbalance," IG market strategist Yeap Jun Rong said.

The US will release 50 million barrels from its SPR by early next year, though a portion of that has to be returned by 2025, while India will release 5 million barrels and the UK will allow companies to voluntarily release 1.5 million barrels.

South Korea also said Nov. 24 that it will release crude oil from its SPR, though it did not specify the timing and volume to be released.

A source at South Korea's energy ministry said the country could possibly release about 4% of the country's SPR, equivalent to around 3.8 million barrels, as it did in 2011 during the Libyan crisis.

The announced figures will do little to calm nerves about soaring energy costs and the associated rise in inflation. Despite declines in the last four weeks, crude prices remain not far from the seven-year highs touched in late October.

In the US, drivers are now facing the highest Thanksgiving gasoline prices in nine years as of Nov. 23.

"The pullback with oil prices is officially over as this oil market deficit will not go away anytime soon. The US may need to consider another SPR release, but even if they talk about it, energy traders know that OPEC+ controls this market," OANDA senior market analyst Edward Moya said.

Media reports indicate the American Petroleum Institute has reported a build in US crude oil and gasoline inventories for the week ended Nov. 19, with crude stocks rising 2.3 million barrels in the week and gasoline inventories up 600,000 barrels.

Distillate stocks bucked the trend, falling by 1.5 million barrels, the reports said.