(C) Reuters. FILE PHOTO: Pipelines run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. Picture taken March 24, 2016. REUTERS/Nick Oxford/File Photo
(Updates prices, adds DOE comments, details)
By Brijesh Patel
BENGALURU (Reuters) – Oil futures rebounded on Thursday, as the market deemed it unlikely that the United States would release emergency crude reserves or ban exports to ease tight supplies.
The U.S. Department of Energy said all “tools are always on the table” to tackle tight energy supply conditions in the market.
The department made the comment amid questions about whether the Biden administration is considering tapping into its Strategic Petroleum Reserves (SPR) or pursuing a ban on oil exports to bring down the cost of crude oil.
Meanwhile, U.S. President Joe Biden’s national security adviser urged energy suppliers to lift flows to meet demand, saying that the United States was concerned about their failure to do so.
Brent futures rose 86 cents, or 1.1%, to $81.94 a barrel by 1:23 p.m. EDT (1723 GMT), after falling to a session low of $79.08. U.S. crude gained 83 cents, or 1.1%, to $78.24 a barrel, recovering from a low of $74.96.
“Right now, it looks like the U.S. is signalling that they’re not planning just yet to tap their strategic petroleum reserves, and that’s kick-starting this rally here,” said Edward Moya, a senior market analyst at brokerage OANDA.
“This is still too early for the U.S. to consider tapping their reserves and we would see them make that decision when we’re deeper into winter and the energy crisis is really starting to become a bigger concern for growth.”
The United States has used its strategic reserves on occasion, usually after hurricanes or other supply disruptions. However, since ending a 40-year ban on crude exports in 2015, the nation has become a significant exporter, and has not broached cutting exports.
Goldman Sachs (NYSE:GS) said a potential SPR release, which could be up to 60 million barrels, only posed a $3 downside risk to its $90l year-end Brent price forecast.
Early session losses were also an extension of Wednesday’s near 2% drop after an unexpected rise in U.S. crude stockpiles and Russian assurances that it would boost gas supplies to Europe in response to the energy crunch and stands ready to stabilise the market. [EIA/S].
Earlier this week, the Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to only gradually raise output, sending crude prices to multi-year highs.
Oil markets have been on a steady rise due to tight supplies worldwide as demand recovered more quickly than expected from the pandemic in big import markets like China.
In addition, major producers and the International Energy Agency believe crude demand could rise by anywhere from 150,000 to 500,000 barrels per day in coming months as users of natural gas switch to oil due to high gas prices.
(Additonal reporting by Arpan Varghese in Bengaluru, Ahmad Ghaddar in London, Naveen Thukral in Singapore; Editing by Marguerita Choy)
Oil resumes rally, U.S. reserve release seen as unlikely