Oil fell on a US plan to sell more crude from its reserves, offsetting a lift from Russian output cuts and rising Chinese demand.
West Texas Intermediate dropped toward $79 a barrel after a volatile session on Monday. The US is looking to sell 26 million barrels from the Strategic Petroleum Reserve in accordance with a budget mandate enacted in 2015.
The decline in crude comes ahead of the release of crucial US inflation data later Tuesday that’ll shape investor expectations for how high the Federal Reserve will push interest rates to bring too-hot inflation back under control.
Oil has had a choppy start to 2023 as traders attempt to price the demand impact of China’s re-opening, the supply curbs announced by Moscow amid the war in Ukraine, and persistent concerns that tighter US monetary policy may trigger a recession. At the same time, the Organization of Petroleum Exporting Countries and its allies have been pressing on with cutbacks in output.
“Prices have dipped after the plan to sell strategic oil by the US, but that story sits on the periphery,” said Vandana Hari, founder of Vanda Insights in Singapore. “What’s baked in right now is the cautious optimism over the US and European economies, a gradual rise in Chinese demand, and a drop of about 500,000 barrels a day in Russian output.”
WTI for March delivery fell 0.7% to $79.58 a barrel on the New York Mercantile Exchange at 6:36 a.m. in London.Earlier, prices lost as much as 1.4%.
Brent for April settlement was 0.2% lower at $86.40 a barrel on the ICE Futures Europe exchange.
The Biden administration ordered an unprecedented release from the SPR last year to combat the inflationary fallout from the war in Ukraine, including soaring gasoline prices. Since then, the Energy Department has sought to stop some of the sales required by 2015 legislation so the reserve can be refilled.
OPEC is due to issue its monthly market snapshot later on Tuesday, offering traders fresh insight into the cartel’s view of supply and demand over 2023.