Oil settles 1% lower as market braces for more supply from US reserve
OIL prices settled more than 1% lower on Tuesday after the United States said it would boost supply in the market by releasing more crude from its Strategic Petroleum Reserve.
On Monday, the US Department of Energy (DOE) said it would sell 26 million barrels of oil from the SPR, already at its lowest level since 1983.
The US Department of Energy (DOE) had considered cancelling the annual sale after US President Joe Biden’s administration last year sold a record 180 million barrels from the reserve to combat sky-high fuel prices. But that would have required Congress to act to change its mandate.
Brent futures for April delivery fell US$1.03, or 1.2 per cent, to US$85.58 a barrel by 1.05 pm EST (1805 GMT). U.S. West Texas Intermediate crude futures for March fell by US$1.08, or 1.4 per cent, to US$79.06 a barrel.
Both benchmarks sank more than US$2 during the session, but pared losses after data showed the slowest pace of acceleration in the US consumer price index since late 2021. Analysts said the data would likely keep the Federal Reserve on a moderate interest rate hiking path.
“Interest rates are now at a point where every 25 basis points matter and could be the difference between a soft landing and a recession,” Oanda analyst Craig Erlam said in a note.
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Oil prices also pared losses after the Organization of the Petroleum Exporting Countries raised its 2023 oil demand forecast by 100,000 barrels per day in a monthly report, citing the reopening of the Chinese economy after Covid restrictions.
“Opec’s monthly oil market report yielded some cautious optimism,” said Kpler analyst Matt Smith. He added that oil prices remained lower as the markets entered a risk-off sentiment.
Also easing supply concerns, the US Energy Information Administration said on Monday it expected record March production from the seven biggest US shale basins.
US crude and product inventories were expected to have grown last week, a Reuters poll showed, ahead of industry data due at 4.30 pm ET (2130 GMT), followed by the EIA’s report on Wednesday. REUTERS
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