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Oil recoups losses on plans for SPR refill, higher seasonal demand

Published May 08, 2023 08:42PM ET Updated May 09, 2023 05:32PM ET
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© Reuters. FILE PHOTO: Flue gas and steam rise out of chimneys and smokestacks of an oil refinery during sunset on a frosty day in the Siberian city of Omsk, Russia, February 8, 2023. REUTERS/Alexey Malgavko
 
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By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices ticked up on Tuesday, reversing a more than 2% drop earlier in the session, as markets weighed U.S. government's plans to refill the nation's emergency oil reserve and anticipated higher seasonal demand.

Brent crude settled 43 cents, or 0.6% higher, at $77.44 a barrel, while U.S. West Texas Intermediate (WTI) crude closed up 55 cents, or 0.8%, at $73.71.

Both benchmarks had fallen about 2.5% earlier in the session after two days of gains.

Biden administration plans to begin purchasing oil to replenish the Strategic Petroleum Reserve helped cover speculative short positions, said Robert Yawger, executive director of energy futures at Mizuho.

Energy Secretary Jennifer Granholm has said the administration could start buying back crude oil for the Strategic Petroleum Reserve late this year after President Joe Biden last year directed the largest sale yet from the stockpile.

A report from the Energy Information Administration (EIA) pointing to higher seasonal demand and lower-than-expected output also supported prices.

"We expect the seasonal rise in oil consumption and a drop in OPEC crude oil production to put some upward pressure on crude oil prices in the coming months," the Energy Information Administration said in its Short-Term Energy Outlook.

The EIA also forecasts U.S. crude production will rise 5.1% to 12.53 million barrels per (bpd) day this year, but lowered its output estimate for this year and next from previous forecasts.

It cut its estimate for Brent and WTI prices by more than 7% each to $78.65 and $73.62 a barrel, respectively.

U.S. crude oil inventories rose by about 3.6 million barrels in the week ended May 5, according to market sources citing American Petroleum Institute figures on Tuesday, compared with analysts' estimate for a drawdown of about 917,000 barrels.

Prices were held back, however, by data that showed China's imports contracted in April, while exports rose at a slower pace, implying weak domestic demand.

Markets were also monitoring U.S. President Joe Biden and top Republican lawmakers' comments on raising the $31.4 trillion U.S. debt ceiling, fearing an unprecedented default if Congress does not act in three weeks.

U.S. consumer price index (CPI) figures for April are due to be released on Wednesday and could determine the Federal Reserve's next interest rate decision.

New York Fed President John Williams said inflation remains too high and that the central bank will raise rates again if necessary, even though the U.S. central bank dropped guidance about the need for future hikes.

While doubts about the economy could weigh on markets, crude prices were supported as wildfires prompted oil producers in the Canadian province of Alberta to shut in at least 319,000 barrels of oil equivalent per day, more than 3.7% of Canada's output.

Oil recoups losses on plans for SPR refill, higher seasonal demand
 

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Comments (8)
EL LA
EL LA May 09, 2023 6:32PM ET
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Back peddling now......
Rubbing Hands
Rubbing Hands May 09, 2023 6:10PM ET
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remember when they said they would refill at 68-72. Biden don't remember either...
Rubbing Hands
Rubbing Hands May 09, 2023 6:09PM ET
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Like all WH promises about spr, all malarkey...
Barani Krishnan
Barani Krishnan May 09, 2023 3:57PM ET
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"Biden administration plans to begin purchasing oil to replenish the Strategic Petroleum Reserve helped cover speculative short positions, said Robert Yawger, executive director of energy futures at Mizuho." Hello, hello ... Reuters quoting Bob Yawger on SPR? Since when Mizuho became part of the White House? And then Reuters sneaks this background paragraph in, conveniently ... "Energy Secretary Jennifer Granholm has said the administration could start buying back crude oil for the Strategic Petroleum Reserve late this year after President Joe Biden last year directed the largest sale yet from the stockpile." Look, there could have been a weekend fist bump, as EL LA contends. But these stories need to be better sourced, for Pete's sake!
Rubbing Hands
Rubbing Hands May 09, 2023 3:57PM ET
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Barni quotes the same thing in his shat articles and then come to Reuters to talk them down. can't even make this stuff up.
Brad Albright
Brad Albright May 09, 2023 3:57PM ET
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Good catch, Barani.
EL LA
EL LA May 09, 2023 3:37PM ET
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Maybe there was another fist bump over the weekend.
Barani Krishnan
Barani Krishnan May 09, 2023 3:37PM ET
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Badly sourced reporting all around.
EL LA
EL LA May 09, 2023 3:37PM ET
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Barani Krishnan  After a little digging, it seems to me that the SPR "news" may have been a manipulation of information that was reported on February 13,2023 (see the energy gov site) concerning sales that were set to take place FY24 - FY27, whereas deliveries from current sales will be ongoing through June 30.
jimmi james
jimmi james May 09, 2023 3:24PM ET
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spr refill?....biden cannot remember his own name...he forgot all aboit the spr
EL LA
EL LA May 09, 2023 3:00PM ET
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Hilarious, I bet the price will be in the 60's by end of summer.
Ge K
Ge K May 09, 2023 7:29AM ET
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Opec is in total control. Prepare for Summer price hikes real soon. Its all about the future not the past.
me ish
me ish May 09, 2023 7:29AM ET
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they want to destroy the petrodollar and kick the US out of the ME
Ge K
Ge K May 09, 2023 7:29AM ET
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me ish that was going to happen anyway…. You will still be able to make lots and lots of money in oil my friend.
Barani Krishnan
Barani Krishnan May 09, 2023 7:29AM ET
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MbS is completely out of control, yes. He needs a Western sort of Putinification to bring him back to reality :)
 
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