By Adedapo Adesanya
Brent crude continued its ascent on Thursday, reaching $111 per barrel after it gained 0.74 per cent or 82 cents as plans emerged that the United States will purchase 60 million barrels of crude in the third quarter of the year in an effort to replace volumes in the country’s strategic petroleum for the first time in nearly 20 years.
Also, the West Texas Intermediate (WTI) crude rose by 0.46 per cent or 50 cents to trade at $108.3 per barrel during the session.
Citing an unnamed Energy Department official, CNN reported that President Joe Biden is planning what is referred to as a “long-term buyback plan” for oil, after authorizing a record release over six months.
Delivery of those first 60 million barrels, according to CNN, would be paid for with revenue received from sales of emergency oil, while the time frame is not specific beyond “future years”.
The proposed reserve buyback came at a time the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed on Thursday to leave its production plan unchanged, aiming to boost crude oil production in June by 432,000 barrels per day, in a move widely expected by the market.
Following a very short virtual meeting, the OPEC+ ministers decided to keep the production plan as it is, continuing the modest monthly increases in nominal production.
This was the third OPEC+ meeting since one of the key members of the alliance, Russia, invaded Ukraine and has refused to take any step, as it “further noted the continuing effects of geopolitical factors and issues related to the ongoing pandemic.”
The move by the OPEC+ alliance came at a time when there are market concerns about slowing oil demand in China over COVID-19, on the one hand, and the possibility that losses of Russian supply would only pile up from now on, on the other hand.
While OPEC+ is sticking to its policy of modest monthly increases, many of its members are not pumping to their quotas and the group overall is around 1.5 million barrels per day below its quota.
Following the meeting’s decision and the production table OPEC provided, OPEC+ will have a quota of 42.558 million barrels per day for June.
Prices also found support from supply worries after the European Union (EU) laid out plans for new sanctions against Russia including an embargo on crude.
Meanwhile, pressure came as the US Dollar rebounded to its highest since December 2002, a day after the US Federal Reserve affirmed it would take aggressive steps to combat inflation.
A strong dollar makes oil more expensive for holders of other currencies.
Equally in the US, a Senate panel advanced a bill that could expose OPEC+ to lawsuits for collusion in boosting oil prices.
The US Congress has failed to pass versions of the legislation for more than twenty years but with rising fuel prices and record inflations breathing down its economy, lawmakers expressed worries.
Dipo Olowookere