Oil Edges Higher as Bargain Hunters Swoop Into the Market
(Bloomberg) -- Oil rose in choppy trade as recent declines below $80 lured some investors back for bargains while the market waited to see whether the U.S. would match China’s plans to release strategic reserves.
Futures in New York closed up 0.8% on Thursday. Buyers were attracted by lower prices after both crude benchmarks fell below their 50-day moving averages in the previous session. Political headlines kept trading volatile. China is releasing some oil from its strategic reserves days after the U.S. invited it to participate in a joint sale as both nations work together to keep a lid on energy costs.
“With lots of political talk trying to chase the market lower, WTI seems to be getting some support at $78, for now, after coming off from the mid-$80s last week,” said Spencer Vosko, director for crude oil at Black Diamond Commodities LLC.
With the global economy gripped by rising levels of inflation, key oil consumers are trying to bring down prices. The International Energy Agency said this week that some of the current tightness in the market is starting to ease as global production picks up, and the volume of oil being transported at sea has risen sharply in recent weeks.
“It feels like the SPR release will happen soon,” said Giovanni Staunovo, commodity analyst at UBS Group AG. “It’s just a question of when it happens and how much crude they release.”
Meanwhile, so-called prompt timespreads have narrowed on the Nymex oil futures complex after a U.S. government report showed inventories at the Cushing, Oklahoma, storage hub gained after five weeks of massive declines. December futures are trading at 60 cents a barrel over the January contract, about half of the premium seen at the start of this month.
China tapped its national crude stockpiles earlier this year in an effort to bring domestic prices down, and it also made a private sale from the reserves. On Thursday, the reserve bureau’s spokeswoman said that more details on the volume and the date of sale would follow on its website in due course.
In the physical market, jitters over the nation’s crude demand are spreading as spot premiums of a key Russian grade favored by Chinese independent processors tumbled by more than a $1 a barrel due to the likelihood of another tax probe, according to traders. Earlier this week, the grade traded at the highest premium since January 2020.
The crude market also drew strength from record outflows of natural gas to U.S. export hubs even as temperatures are expected to drop in the Northeast. With natural gas demand booming globally, more oil may need to be refined to meet heating needs.
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