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By Barani Krishnan
Investing.com – Oil clawed back Thursday’s early losses and a chunk of the previous session’s slide on a report that the U.S. government was not planning to sell crude from its emergency reserves nor ban exports of the commodity to contain runaway fuel prices and inflation.
U.S. crude’s West Texas Intermediate benchmark settled up 87 cents, or 1.1%, at $78.30 per barrel.
London-traded Brent crude, the global benchmark for oil, finished up 87 cents, or 1.1%, at $81.95.
Both crude benchmarks fell about 3% earlier in the day, extending Wednesday’s 2% drop, as the trade worried about the impact of a crude sale from the Strategic Petroleum Reserve as well as the reimposition of a four-decade ban of U.S. oil exports lifted in 2015.
The concerns arose after Energy Secretary Jennifer Granholm cited the so-called SPR sale and export ban as among tools the government had to battle a supply and price crisis in oil now. Granholm made the remarks at an industry event hosted by the Financial Times on Wednesday.
A Bloomberg reporter following up on the FT story, however, tweeted out mid-morning Thursday that the Department of Energy was not considering tapping into its SPR “at this time”, nor pursuing a ban on oil shipments. Oil bulls immediately chased prices higher on the Bloomberg tweet.
“Energy traders initially thought that perhaps the Biden administration was panicking and wanted to tap the SPR a lot sooner than warranted,” Ed Moya, an analyst at OANDA, said, referring to the back-and-forth on the SPR sale and export ban story. “The oil market is still heavily in deficit and that will likely be the story over the winter.”
The SPR, located near the U.S. Gulf of Mexico, is the world’s largest emergency stockpile of crude oil. Managed by the Department of Energy, the reserve contained 617.8m barrels of oil last week — equal to about a month of US petroleum products demand.
The last big release from the reverse was in 2011, when the Obama administration worked with other International Energy Agency members to tap emergency stocks to bring down soaring prices then. The U.S. Congress has also authorized periodic sales from the SPR to raise government revenue.
Exports of U.S. crude oil have been unfettered since Congress lifted federal shipment restrictions in 2015, with the country sending out anywhere between 2.0 million and 3.0 million barrels per day to China and other locations.
The average price of petrol at U.S. pumps is hovering at $3.19 a gallon — the highest in seven years — with the White House fearing that the rise in fuel costs could damage the administration’s political prospects ahead of the midterm elections next year.
Global crude prices, represented by WTI and Brent, are, meanwhile, up about 60% on the year.
Oil prices also came under pressure on Wednesday after a second straight build in weekly stockpiles of U.S. crude.
Crude stockpiles rose by 2.35 million barrels in the week to October 1, following through with the 4.58-million build in the previous week to September 24, the Energy Information Administration said in its Weekly Petroleum Status Report.
Aside from the crude build it reported, the EIA raised its production estimates for U.S. crude to 11.3 million barrels per day for the week to October 1 from a previous 11.1 million daily.
The EIA said gasoline inventories rose by 3.26 million barrels during the week to October 1, versus the forecast build of 400,000 barrels. In the previous week, stockpiles of the motor fuel rose by 3.48 million.
Oil up as Report Recants Talk of U.S. Reserve Sale or Export Ban