Oil prices slide as the US says it will sell millions more barrels of oil from its strategic reserve into the global market
- Oil prices fall Tuesday after the US said it plans to sell more oil from the Strategic Petroleum Reserve.
- West Texas Intermediate crude dipped fell below $80 a barrel during the session.
Oil prices dropped Tuesday after the US announced plans to sell more inventory from its Strategic Petroleum Reserve, adding to the global market's already-volatile crosscurrents in supply and demand.
West Texas Intermediate crude lost as much as 3.3% when hitting an intraday low of $77.46 a barrel. The decline was later pared to 1.2% to $79.13. WTI was on track to close below $80 barrel after the US Department of Energy late Monday said it plans to sell 26 million barrels from the SPR. Under the sale mandated by Congress, sweet crude will be sold from two storage areas starting April 1.
Brent crude oil, the global benchmark, fell 1.5% to $85.40 a barrel but was off lows of the session.
"The oil market was supposed to get a little tighter as energy traders were expecting the next move to be refilling the SPR," said Edward Moya, senior market analyst at Oanda, in a Tuesday note.
The Biden administration sold a massive 180 million barrels from the SPR last year after Russia's invasion of Ukraine disrupted supply and pushed crude oil prices past $100 a barrel. The sales drew the SPR to its lowest since 1983.
The drop in oil prices Tuesday was also taking place as US consumer price inflation data showed prices eased in January, but it was by less than anticipated. Prices for rent, food and energy increased on a monthly basis. Investors are watching for inflation to cool down further from its peak which could lessen pressure on the Federal Reserve to keep interest rates elevated.
"Oil could be in the danger zone if the bond market selloff intensifies and makes some traders price in deeper recession. No one has strong confidence with their US growth outlook, which means the market could go from pricing in a 'soft landing' to a short & shallow recession or even a 'classic recession,"' said Moya.
The International Energy Agency last month called the global oil balance "well-supplied" at the start of 2023 but cautioned the market could quickly tighten as Western sanctions hurt Russian oil exports.
The pending sale of more oil from the SPR isn't a concern for producers in the United Arab Emirates, UAE's energy minister Suhail Al Mazrouei told Bloomberg TV. He said more US oil coming into the market isn't a long-term solution for the Biden administration to keep prices lower.
OPEC, meanwhile, on Tuesday, raised its 2023 oil demand forecast by 100,000 barrels per day, to 2.3 million barrels, as China reopens its economy after strict COVID-related restrictions.
"Much will depend on how the government plans to maneuver the delicate balance of curbing Covid-19 infections versus opening up for business," OPEC said in its monthly oil report.