Oil Rises After U.S. Signaled No Plans to Tap Crude Reserves

Oil rebounded after the U.S. Energy Department said it has no plans “at this time” to tap into the nation’s oil reserves to help quell rising gasoline prices.

Futures in New York rose 0.8% after earlier falling as much as 3.2% on Thursday. The department’s statements followed a Financial Times report on Wednesday that Energy Secretary Jennifer Granholm had raised the prospect of releases from the Strategic Petroleum Reserve.

“They key to remember is that the Biden administration is very keen on having low gasoline prices for consumers,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd., in a Bloomberg Television interview. “So if prices continue to go up and overheat, then they will be putting pressure on OPEC.”

Crude has increased about 15% since mid-August following an increase in consumption as countries emerge from the worst of the pandemic. The energy crunch from Europe to Asia also raised the prospect of greater demand for oil ahead of winter at a time when OPEC+ producers decided to only gradually add back oil supplies to the market.

It is “only a matter of time” before OPEC+ accelerates supply increases, especially if oil remains over $80/bbl, according to Citigroup Inc.

The group’s decision to stick with an increase of only 400,000 barrels a day for next month was clearly an effort to maximize short-term revenues as demand escalates and inventories drop, analysts said in a note on Wednesday.

Prices
  • West Texas Intermediate crude for November delivery rose 74 cents to $78.17 a barrel as of 11:41 a.m. in New York
  • Brent for December settlement rose 85 cents to $81.93 a barrel on the ICE Futures Europe exchange

Meanwhile, Russian President Vladimir Putin’s comments earlier this week on European gas supplies were a deliberate attempt to calm an increasingly unstable market, said two people with knowledge of the country’s energy policy.

There were some strings attached to the potential offer of record Russian gas export volumes this year, perhaps the quick approval of the Nord Stream 2 pipeline. But the people said the overriding motivation behind Putin’s statement was to bring down prices that had run too high.

Other market news:
  • Vladimir Putin’s comments on European gas supplies on Wednesday were a deliberate attempt to calm an increasingly unstable market, said two people with knowledge of the country’s energy policy.
  • Oil explorers need to raise drilling budgets by 54% to more than half a trillion dollars to forestall a significant supply deficit in the next few years, according to Moody’s Investors Service Inc.
  • U.S. shale oil production will expand at a “modest rate” over the next 18 months even as prices touch multiyear highs, according to BloombergNEF, leaving OPEC in a powerful position as the world cries out for more barrels.

–With assistance from Sharon Cho, Jack Wittels, Alex Longley and Jessica Summers.

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