Oil Recoups 1% as US Halts Plan to Tap into Reserves

By Adedapo Adesanya

Oil recovered some previous day losses with the Brent crude rising by 1.74 per cent or $1.41 to trade at $82.49 per barrel on Thursday as the market deemed it unlikely that the United States would release emergency crude reserves or ban exports to ease tight supplies.

Also, the West Texas Intermediate (WTI) crude increased by 1.87 per cent or $1.45 yesterday to trade at $78.88 per barrel as the market breathed relief when the US Department of Energy said it was no longer considering a release of the Strategic Petroleum Reserve (SPR).

The news came shortly after Goldman Sachs estimated that if the US DoE released oil from the SPR, it would likely be limited to just 60 million barrels—posing a $3 downside risk to its year-end $90 barrel Brent forecast.

The department made the comment amid questions about whether President Joe Biden’s administration was considering tapping into its SPR or pursuing a ban on oil exports to bring down the cost of crude oil which was bringing about inflationary pressures.

A larger-than-expected rise in US crude inventories last week also weighed on prices as stocks rose by 2.3 million barrels, the US Energy Information Administration said (EIA).

Also, moves to cool record-high gas prices could ease prices as Russian President Vladimir Putin said that his country was boosting gas supplies to Europe, in response to the energy crunch and stands ready to stabilise the market amid surging prices.

Analysts say as winter approaches those gas prices could have an impact on the already tight crude market as some users switch to oil.

Earlier this week, the Organisation of the Petroleum Exporting Countries and allies (OPEC+) agreed to stick to its plan to raise output by 400,000 barrels per day in November, sending crude prices to multi-year highs.

In recent months, the White House has been in contact with OPEC over the price of oil, urging them to further ease the cuts.

The OPEC+ group, however, didn’t heed any calls from the US and other nations and proceeded earlier this week to stick to the expected plan, sending prices higher.

OPEC+’s decision was partly driven by concern that demand and prices could weaken.

Yet, major producers and the International Energy Agency (IEA) see that crude demand could rise by anywhere from 150,000 to 500,000 barrels per day in the coming months as users of natural gas switch to oil due to high gas prices.