Oil prices opened higher this week, extending gains on Friday after news emerged that the U.S. federal government was taking further action. buy Up to 3 million barrels as strategic oil reserves.
So far, the government has purchased 9 million barrels of crude oil in three installments, the first phase of SPR replenishment after withdrawing more than 180 million barrels last year to stabilize fuel prices. .
Prices are currently in the Department of Energy’s sweet spot, but it’s no surprise that prices would jump as soon as the Department of Energy announced it was buying, and that’s exactly what happened. Still, WTI remains well below the upper end of the Energy Department’s own price range ($79 per barrel).
“We know the Biden administration is looking to replenish the SPR in the market, which will provide support,” IG analyst Tony Sycamore said in a note. Quote According to Reuters.
“Concerns about Chinese demand are still holding back some of the gains this week,” another IG analyst told Bloomberg. Yeap Jun Rong added that news of SPR replenishment will naturally push prices higher, “but it remains to be seen whether this marks the ‘true’ bottom for oil prices.”
Oil prices have fallen for the seventh straight week, despite OPEC+’s announcement that production cuts will continue until at least the end of March, totaling 2.2 million barrels per day starting in January.
The failure to support prices comes from traders’ perception of oversupply and expectations that China’s oil demand growth will slow next year.
At the same time, reports of record U.S. production have reinforced fears of oversupply, especially since demand forecasts for next year are rather pessimistic, at least according to the IEA.
Written by Charles Kennedy, Oilprice.com
