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Oil futures fell Tuesday, after the U.S. government said that it would follow through with a plan to sell another 26 million barrels of crude from its Strategic Petroleum Reserve.
Price action
-
West Texas Intermediate crude for March delivery
CL.1,
-1.51% CLH23,
-1.51%
fell 92 cents, or 1.2%, to $79.22 a barrel on the New York Mercantile Exchange. -
April Brent crude
BRN00,
-1.29% BRNJ23,
-1.29% ,
the global benchmark, was down 87 cents, or 1%, at $85.74 a barrel on ICE Futures Europe. -
Back on Nymex, March gasoline fell 1.3% to $2.4972 a gallon, while March heating oil
HOH23,
+0.07%
edged up 0.3% to $2.9135 a gallon. -
March natural gas
NGH23,
+6.20%
was up nearly 6.2% at $2.553 per million British thermal units after losing 4.3% on Monday.
Market drivers
On Monday afternoon, the U.S. Energy Department announced a “notice of sale” to meet its obligation to Congress to sell 26 million barrels of crude oil from the SPR this year. It said the sale will “fulfill the congressional mandate set forth” as part of the Bipartisan Budget Act of 2015 and the Fixing America’s Surface Transportation Act.
The deliveries of the oil will take place form April 1 through June 30, it said.
“The mandated sales were set in motion years in advance to raise funds for Congress,” StoneX’s Kansas City energy team wrote in a Tuesday newsletter.
The release comes after the U.S. last year drained 180 million barrels from the reserve as part of an effort to combat a jump in prices after Russia’s invasion of Ukraine last February.
“After the massive sales in 2022, there’s a lot less crude to sell from the SPR than in the past,” wrote the StoneX energy team.
“” After the massive sales in 2022, there’s a lot less crude to sell from the SPR than in the past.” ”
The coming release is separate from the 2022 sales, but there had been speculation that the 2023 sales would be canceled by the Biden administration given the low remaining level of reserves.
“This stance appears to have surprised the markets, as many had been expecting the 2023 release to be canceled and for the resupplying of reserves to start. Instead, the market will receive an extra 26 million barrels from the U.S. oil reserves, with prices falling immediately after the announcement,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
Meanwhile, in a monthly report, the Organization of the Petroleum Exporting Countries, or OPEC, on Tuesday nudged up its forecast for growth in world oil demand this year by 100,000 barrels a day, bringing it to 2.3 million barrels a day.
Oil traders also await the weekly U.S. petroleum supply report from the Energy Information Administration due Wednesday.
On average, analysts polled by S&P Global Commodity Insights forecast supply gains of 600,000 barrels for commercial crude and 1.6 million barrels for gasoline, while distillate stockpiles are expected to fall by 100,000 barrels for the week ended Feb. 10.
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