Thread by @RogerDiwan

Few conclusions about today's large global release from strategic inventories from the US, China, Japan and India #oott #opec

1) this large/coordinated release of strategic stocks is aimed to inject more oil in markets at the time when OPEC plus has created a sense of scarcity. This coordinated action is a novel way to counter producers' slow action by forcing liquidity in the system #OOTT #OPEC

2) 1)If OPEC+ was acting a the central bank of oil as it like to say, the strategic stock release is a counter injection of liquidity to lower prices. In Central Bank parlance, another central bank injected liquidity to lower rates #OOTT #OPEC

3) When consuming countries are focusing on fighting rising inflation, using strategic stocks is one of the tools that they have decided to use. We have seen and will continue to see interventions in several sectors of the economy to achieve the same goals #OOTT #OPEC

4) It is a clear signal that consuming countries were concerned by the rate of the price change, and a stabilization at a slightly lower level will be a success. the fear of the intervention brought oil prices down by $8/b that's plenty of success for political action #oott #OPEC

5) More importantly, it broke price momentum, and consuming countries bought themselves time by acting now, knowing that a lower demand period is around the corner. It is a bridge, not a long term solution #OOTT #OPEC

6) In that context, OPEC+ has little interest and incentives to retaliate against this move. It will be very difficult to find a consensus to "punish" their most important customers and political allies #OOTT #OPEC

7) The inclusion of China is significant and does provide a political cover to the US action. China did build large stocks during the COVID crisis and it was always perceived that it could be used commercially and act as a brake to price momentum if needed. #OOTT #OPEC

8) This action will force a reconsideration of the market situation, now that a consensus is forming that we will have surpluses in Q1 and probably Q2. #OOTT #OPEC

9) Oil markets are still in recovery mode from the Covid crisis in 2022, but a new price regime is forming: the ceiling is created by reactivity to prices, being shale growth, government actions, inflations concerns. #OOTT #OPEC

10) the super-cycle thesis had many holes, and none of which more than under-estimating reactions to higher prices by both producers and consumers. This is another proof. End
#OOTT #OPEC