Oil Market Drops as Biden Plans Another Reserve Release

By Adedapo Adesanya

The oil market reversed the recent gains and settled lower on Tuesday as investors worried about lower consumer confidence and braced for another 20 million barrels of crude oil to be released from the United States Strategic Petroleum Reserve (SPR).

Brent crude futures fell 75 cents or 0.7 per cent to settle at $104.40 per barrel as the US West Texas Intermediate (WTI) crude fell by $1.72 cents or 1.8 per cent to $94.98.

The administration of President Joe Biden said it will sell an additional 20 million barrels of SPR crude oil as part of a previous plan to tap the facility to calm oil prices boosted by Russia’s invasion of Ukraine in February and recovery in demand that was affected early in the pandemic.

As part of the Tuesday announcement, the White House cited a “new analysis” from the Department of Treasury that estimates that the previous SPR releases that the White House pegs at 125 million barrels—along with the releases of crude oil from foreign partners as well—has reduced fuel prices by “up to about 40 cents per gallon”.

The government also announced steps to repurchase oil for the SPR “in future years, likely after FY2023” to help encourage more near-term supply.

Tuesday’s announcement is for the fifth sale that President Biden has authorized from the SPR.

The 125 million barrels that the White House cited include 70 million barrels that have made their way to buyers already while the rest are “planned to be delivered to customers in the weeks and months to come.”

Four months ago, the administration said it would release a record 1 million barrels per day of SPR crude oil for six months.

The market also subsided after a survey showed that consumer confidence dropped to nearly a 1-^1/2-year low in July on worries about inflation and rising interest rates.

The market will also be bracing for higher US interest rates as the Federal Reserve is expected to raise rates by 75 basis points at the conclusion of its policy meeting on Wednesday.

Industry group, the American Petroleum Institute (API) said crude stocks in the US, the world’s largest oil producer fell by 4 million barrels last week, which is four times the 1 million barrel decline expected by analysts.

The US government’s Energy Information Administration (EIA) will release its weekly oil report later on Wednesday.