By Barani Krishnan
Investing.com -- Crude markets tumbled as much as $8 a barrel between Wednesday’s high and lows, the second time in five sessions that they swung as much, as President Joe Biden’s gasoline tax holiday plan and other measures to clamp down on runaway fuel prices caught up with bulls’ attempts to keep oil at north of $120.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down $3.33, or 3%, at $106.19 per barrel.
London-traded Brent crude, the global benchmark for oil, settled down $2.91, or 2.5%, at $111.74.
At the session low, WTI was at $101.58 versus its high of $109.58. Brent was at $107.06 against the intraday peak of $116.25.
Oil bulls are trying to shake off the worst selloff in two months that sent WTI down 9% last week and Brent 8% lower amid fears of a U.S. recession that could bite demand for oil.
Wednesday’s volatility was fueled by uncertainty about government actions, including regulations, that might be aimed at refiners and oil producers about fuel prices hovering just below record highs of $5 a gallon.
U.S. Energy Secretary Jenifer Granholm is to meet representatives of the oil industry on Thursday to find ways to bring both crude and fuel pump prices lower.
“Oil volatility will remain elevated now that opposing opinions are emerging on where prices will finish the year,” Ed Moya, analyst at online trading platform OANDA, said. “Oil prices are under pressure as global recession fears accelerated crude demand destruction calls. Inflation and growth concerns won’t be improving anytime soon and that has all the short-term drivers turning negative for the crude demand outlook.”
Moya noted that Citigroup’s head of commodity forecasts Ed Morse had called for $80 oil by the fourth quarter even as Goldman Sachs’ Jeff Currie stuck to his projection of a so-called supercycle in crude prices.
On Wednesday, unleaded gasoline averaged at $4.96 a gallon across the United States, down from a record-breaking $5.02 on June 13, according to the American Automobile Association. The federal government taxes gasoline at 18.3 cents per gallon and diesel fuel 24.3 cents per gallon.
Biden said on Wednesday asked Congress to consider a three-month suspension of the 18.4 cents per gallon federal tax on gasoline and call on states to suspend their fuel taxes. The president urged refiners to ensure that the entire savings be passed on to the American people.
“Together, these actions could help drop the price at the pump by $1 a gallon or more,” Biden said in an announcement from the White House.
While lower pump prices could actually boost demand for fuel and support crude prices, PVM analyst Stephen Brennock said in comments carried by Reuters that traders were worried that the administration might take further measures to cool high energy prices.
That could include shutting down a loophole, called Footnote 563 under the trading guidelines of the Commodity Futures Trading Commission, or CFTC, that has been flagged to the Biden administration, an investigative report by the TYT Network said last week.
Footnote 563 principally allows Wall Street’s biggest financial firms to overwhelm healthy price-setting with massive volumes of commodity-based swaps — which are essentially bets on commodity prices.
Market participants were also on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.
The API will release at approximately 4:30 PM ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended June 17. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Thursday.
For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 569,000 barrels, versus the 1.96-million barrel rise reported during the week to June 10.
On the gasoline inventory front, the consensus is for a draw of 452,000 barrels over the 710,000-barrel decline in the previous week.
With distillate stockpiles, the expectation is for a climb of 328,000 barrels versus the prior week’s gain of 725,000.