Oil storage tanks are seen from above in Carson, California.
Robyn Beck | AFP | Getty Images
Oil prices rose on Wednesday as caution over tighter supply counteracted the negative impact of uncertain demand and news that the United States will release more crude from its reserves.
Brent futures for December settlement ended up $2.38, or 2.6%, at $92.41 a barrel. U.S. West Texas Intermediate (WTI) crude for November, which expires Thursday, ended at $85.55 a barrel, up $2.73, or 3.3%.
“In reality, an SPR release is short-term bearish, long-term bullish because you’ll have to buy it back eventually,” said Gary Cunningham, director of market research at Tradition Energy. “Overall, the market continues to swing wildly and jitter on erratic news.”
In the previous session, benchmarks hit a two-week low after US President Joe Biden said he planned to release 15 million barrels of oil from the Strategic Petroleum Reserve (SPR).
Biden, in remarks on Wednesday, noted that the United States plans to buy back oil for the reserve if prices drop enough. The release of reserves would be the latest sale of the planned sale of 180 million barrels of oil announced shortly after Russia invaded Ukraine in February.
Oil prices have risen since the Organization of the Petroleum Exporting Countries agreed to cut its production target by around 2 million barrels per day – although this is only expected to include around 1 million barrels of lower actual output.
“They want Brent around $90, so they’re going to get it and they’re going to keep cutting production to maintain that number,” Cunningham said.
US crude inventories fell unexpectedly last week – down 1.7 million barrels, the Government Weekly showed, against expectations of a 1.4 million barrel increase. SPR levels fell from 3.6 million barrels to just over 405 million, the lowest since May 1984.
An impending European Union ban on Russian crude and petroleum products and production cuts from the Organization of the Petroleum Exporting Countries and other producers, including Russia, a group known as OPEC+ , 2 million barrels per day also supported prices.
EU sanctions on Russian crude come into effect in December, and sanctions on petroleum products will come into effect in February.