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Crude Oil Prices Hit Seven-Year High as Hopes for SPR Release Fade

Commodities Oct 08, 2021 10:44AM ET
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By Geoffrey Smith 

Investing.com -- Crude oil prices hit $80 a barrel in the U.S. for the first time since 2014 on Friday, a day after the Energy Department played down reports that it was looking at selling barrels from the U.S. Strategic Petroleum Reserve.

The Department said on Thursday that is has “no plans to take action at this time” but appeared to leave the door open to the move, saying that “All tools in the tool box are always under consideration to protect the American people.”

By 10:40 AM ET (1440 GMT), U.S. crude futures were just off their intraday high but still up 2.1% at $79.92 a barrel. Brent crude futures were were up 1.6% at $83.32 a barrel. Gasoline RBOB futures were also at a seven-year high, up 1.6% at $2.3715 a gallon.

The market was unshaken by a labor market report from the U.S. earlier that showed job creation running more slowly than expected in the month through mid-September. The U.S. economy added only 194,000 jobs in the month, well short of the 500,000 expected. August’s disappointing figure of 235,000 was, however, revised up by over 130,000.

The Department has also chosen not to confirm another rumor that had done the rounds earlier in the week, namely that it is considering a reintroduction of the ban on crude oil exports from the U.S. market to redress the supply-demand balance. The ban had been lifted by President Donald Trump after being in place since the oil shocks of the 1970s.

While crude prices generally set the trend for other fuels in the global market, the situation is currently reversed, as shortages of natural gas and coal – especially in Asian markets – create a rare opportunity for oil-powered electricity generators.

U.S. natural gas prices are set for an eighth straight weekly rise, in which time they are up by 49%. Futures were off their earlier peaks in early trading, however, down 0.4% on the day at $5.65 per million Btu. By comparison, Reuters reported that average prices for LNG cargoes delivered into Asia next month are quoted at around $37 per mmBtu.

Demand for motor fuel is also staying strong as the global wave of Delta-variant Covid-19 recedes, allowing the reopening of big energy-consuming economies in south and south-east Asia.

Rystad Energy analyst Louise Dickson noted that the market doesn’t need to be as tight as it is, given that OPEC and its allies still have more than 8.6 million barrels a day of crude oil output capacity lying idle.

“The group is seemingly basking in higher prices, at least in the very short-term, depriving the market of the only supply cushion that exists,” Dickson said in a note to clients. “OPEC+ controls 95% of global crude oil spare capacity and there simply aren’t other sources to tap into to bring more of an equilibrium to the market.”

Later Friday, Baker Hughes’ weekly rig count will show how far U.S. companies are reacting to the price spike by increasing drilling. But the group is seemingly basking in higher prices, at least in the very short-term, depriving the market of the only supply cushion that exists.

Crude Oil Prices Hit Seven-Year High as Hopes for SPR Release Fade
 

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Comments (3)
Yash Agrawal
Yash Agrawal Oct 08, 2021 12:59PM ET
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Now in big BEARISH way to trap the market
perplexed76 .
perplexed76 . Oct 08, 2021 12:09PM ET
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no need to open reserves, just kick out all types of financial parasites from oil market.
Kate Davis
Kate Davis Oct 08, 2021 11:22AM ET
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This tyrannical regime wants to keep gas price as high as possible to FORCE us to by EV, just like they're doing on FORCING vax. BTW, Piglose's hubby can make a lot of $$$$$$. This entire system is so corrupted!
Emmanuel Jabin
Emmanuel Jabin Oct 08, 2021 11:22AM ET
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I didn't like Trump much, but he did all he could to help the US energy sector. Biden is using renewables as an excuse to ****the Energy sector. OPEC and Russia wins..high oil price and high gas prices to continue!!
 
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