Oil up again as unidentified sources say U.S. reserves to be refilled

Investing.com — Crude prices rose for a third straight session on thinly-sourced reports that the Biden administration will cancel remaining draws from the Strategic Petroleum Reserve, or SPR, and fill it up instead with what could be as many as 200 million barrels or more.

Up until the reports about the SPR surfaced in early afternoon trading, both U.S. crude and global oil benchmark Brent had been down as much as 2% on caution ahead of Wednesday’s release of key data.

The Biden administration’s use of the SPR has been a highly-charged matter for oil bulls and opponents of President Joe Biden. Both sides accuse him of indiscriminately releasing stockpiled oil to subdue crude prices and shore up his political standing with American voters — when the reserve is meant for emergency use, in times of critically short oil supply.

Biden, in his defense, said he authorized the release of more than 200M barrels from the SPR to provide relief to Americans encumbered by record high pump prices of fuel, which stood at above $5 per gallon last June and now hovers at around $3.50. The administration also blames last year’s high crude prices for U.S. inflation getting to four-decade highs of above 9% in June.

New York-traded West Texas Intermediate, or , crude settled up 55 cents, or 0.8%, at $73.71 per barrel. The U.S. crude benchmark had risen $1.82 on Monday and $2.78 on Friday. Week-to-date, WTI was up around 3% after three prior weeks of losses totaling 13%.

London-traded crude settled up 43 cents, or 0.6%, at $77.44. The global oil benchmark had gained $1.71 in the previous session and $2.80 prior to that. Week-to-date, Brent is up around 3% after three prior weeks of losses totaling more than 12%.

Tuesday’s higher close came as Bloomberg reported that the Biden administration announced it was canceling some 140M barrels of previously mandated sales of SPR and would begin replenishing strategic reserves later this year. There were no further details quoting any official from the administration to confirm the authenticity of the report.

Another headline attributed to an unnamed source said the administration “plans to begin buying oil to refill the SPR after completing maintenance work this year.”

On Twitter, a headline attributed to CNBC, meanwhile, said U.S. officials are also “weighing future SPR drawdowns in the new year if prices spike post-embargo/price cap.”

Analysts said the rash of weakly-sourced headlines was confusing in the least.

“So, which is which?” asked John Kilduff, partner at New York energy hedge fund Again Capital. “Are we going to build the SPR again right away, which would be bullish for prices, or are we going to wait till the so-called maintenance period, which would be not-so bullish, or rather negative, for prices? And if we’ll start drawing again if prices spike, shouldn’t that mean any rally would be tempered?”

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 16:30 ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended May 5. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

For last week, analysts tracked by Investing.com expect the EIA to report a drop of 0.917M barrels, versus the 1.28M barrel reduction reported during the week to April 28.

On the front, the consensus is for a draw of 1.233M barrels over the 1.743M build in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.

With , the expectation is for a drop of 0.808M barrels versus the prior week’s deficit of 1.191M. Distillates, which are refined into , diesel for trucks, buses, trains and ships and fuel for jets, have been the strongest component of the U.S. petroleum complex in terms of demand.

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