Oil advanced - following a two-day decline — as the US signaled that it may start refilling the Strategic Petroleum Reserve after June, offsetting gathering concerns about softer physical demand.
West Texas Intermediate climbed above $71 a barrel and was little changed for the week after dropping almost 4% over the previous two sessions. Energy Secretary Jennifer Granholm told lawmakers that the US hopes to start refilling reserves after a congressionally-mandated drawdown ends next month.
Still, the overall outlook remains clouded, with the physical market showing signs of weakness amid poor refining margins and lackluster buying in some areas. The two biggest economies also showed further evidence of cooling this week, with US jobless claims rising and China’s recovery waning.
Crude has lost about 14% in the past month as the US economy moved closer to recession and China’s rebound continued to disappoint. That’s outweighed the lift from crude production cuts announced by the Organization of Petroleum Exporting Countries and its allies.
“Prices may hit a floor soon, with low prices providing an entry point for many market players to put on new long positions,” said John Driscoll, director of JTD Energy Services Pte. “There are many waiting for a dip-buying opportunity, with a modest price recovery in the second half on tighter supply likely.”
At present, the SPR is at a four-decade low following an emergency withdrawal last year ordered by President Joe Biden to combat the inflationary impact from the war in Ukraine. Earlier this week, the administration said it planned to begin purchasing oil to replenish the reserve after completing maintenance.
In the Middle East, Iraq said it’s resuming oil exports through the port of Ceyhan in Turkey on Saturday, according to the country’s oil minister.
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