Oil finished higher on Thursday, with prices rebounding after dropping to their lowest levels in about six weeks on reports that China plans a release of crude from its reserve and news that the Biden administration has been pressing other countries to join in.
The Biden administration asked China, India and Japan to release reserves as part of a coordinated effort to push down prices, Reuters reported, citing anonymous sources.
At a press briefing Thursday afternoon, when asked about whether the Biden administration has had discussions with other countries regarding a joint release of oil reserves, White House Press Secretary Jen Psaki said members of the U.S. national security team have discussed the need to meet supply demands with a range of countries, including China.
News reports Wednesday said that the issue of releasing reserves came up earlier this week in a virtual meeting between President Joe Biden and Chinese leader Xi Jinping. Bloomberg reported Thursday that China had taken steps to begin releasing some crude from its reserves.
“A concerted approach would certainly have a greater impact on the oil market than if the U.S. embarked on this path on its own,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
After spending part of Thursday trading lower, however, oil prices moved up to end the session higher.
“It’s a sell the rumor, buy the fact situation — and oil prices should trend back higher from here,” Phillip Streible, chief market strategist at Blue Line Futures, told MarketWatch. “Oil should benefit from tight inventories and increasing demand.”
West Texas Intermediate crude for December delivery rose 65 cents, or 0.8%, to settle $79.01 a barrel on the New York Mercantile Exchange after touching an intraday low of $77.08. The December contract expires at the end of Friday’s trading session.
January Brent crude, the global benchmark, tacked on 96 cents, or 1.2%, at $81.24 a barrel.
The WTI and Brent crude contracts ended Wednesday’s session at their lowest settlements since early October.
Among the petroleum products traded on Nymex, December gasoline climbed 0.6% to $2.294 a gallon and December heating oil added 0.8% to settle at $2.384 a gallon.
“As far as China releasing oil from their reserve, we’ve been there and we’ve done that and it has had little impact,” Phil Flynn, senior market analyst at The Price Futures Group, wrote in a daily note. “The bigger issue, of course, is will China release in conjunction with a bigger release from the U.S. and Japan.”
The market has already seen some pretty sizable releases from the U.S. Strategic Petroleum Reserve the last two weeks, he said. For the week ended Nov. 12, Wednesday’s Energy Information Administration showed oil stocks in the SPR at 606.1 million barrels, down 3.3 million from a week earlier.
“Those releases were part of a bigger predetermined release, but the size of the releases has been raising eyebrows,” said Flynn. “Is the Biden administration already starting a major SPR release? And if so, it is likely that it will backfire making oil much more expensive in the future?”
“There may be the opportunity over the next few weeks to bottom fish for some long-term options,” Flynn said.
On Wednesday, Biden asked Federal Trade Commission Chair Lina Khan in a letter to immediately “consider whether illegal conduct is costing families at the pump.”
“The discrepancy between the persistently high pump prices and the exchange prices for gasoline, which have been falling since late October, is clearly a thorn in Biden’s side,” Fritsch said.
Natural-gas futures settled higher Thursday, to recoup a small portion of Wednesdays nearly 7% drop.
The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas rose by 26 billion cubic feet for the week ended Nov. 12. IHS Markit had forecast an increase of 24 billion cubic feet.
December natural gas ended at $4.902 per million British thermal units, up 1.8%. Prices were at $4.961 shortly before the supply data.