U.S. West Texas Intermediate crude oil futures are trading nearly flat after posting a volatile two-sided trade throughout the week. Underpinning prices were concerns over tightening supply that offset the destructive impact of uncertain demand, and the news that the United States will release more crude from its Strategic Petroleum Reserve (SPR).
For bullish traders, the focus should be on tightening supply. The factors influencing this narrative are the OPEC+ production cuts, the EU embargo on Russian energy products, and falling U.S. stockpiles. All of these factors appear to be weighing on worries over recession-driven demand destruction and the release of SPR crude.
Increased Supply from SPR Release Capping Gains
On Tuesday, WTI fell by 3.1% and Brent by 1.7% to their lowest levels in two weeks on reports of U.S. President Joe Biden’s plans to release more barrels from the Strategic Petroleum Reserve (SPR).
This is probably Biden’s last chance to drive down crude oil and gasoline prices before the November elections, but it’s probably only a short-term solution since the upcoming EU embargo is expected to tighten supply. Lower output from OPEC+ is also expected to increase supply.
In December, the administration plans to sell 15 million barrels of oil from its reserves, the final tranche of the 180 million barrels release announced earlier this year, a senior U.S. official said.
More Demand May Be Coming