Oil futures: Prices rebound as US official signals SPR buyback
Quantum Commodity Intelligence – Crude oil futures Tuesday were higher, having reversed earlier losses after the US said it could start to replenish the nation's strategic reserves following last year's unprecedented 180-million barrel sale.
Both WTI and Brent pared losses after the US administration indicated it would cancel some of this year's mandated SPR sales and start to rebuild stockpiles later in 2023, which currently stand at a four-decade low of 364.9 million barrels.
Jul23 ICE Brent futures were trading at $77.26/b (2015 GMT), compared to the day's range of $75.07-$77.50/b and Monday's settle of $77.01/b.
At the same time, Jun23 NYMEX WTI was trading at $73.53/b versus Monday's close of $73.16/b.
Energy Secretary Jennifer Granholm said the administration could start buying back crude oil for the SPR later this year, although analysts said any buying is likely to be price dependent.
Last November, Amos Hochstein, US special presidential coordinator said the US would start buying back when spot oil prices are in the low $70s per barrel range.
Oil benchmarks had been in negative territory for most of the session, as markets paused ahead of this week's US inflation figures with traders looking for further clues on US interest rate policy.
"The focus now shifting to Wednesday's April CPI report, and a sense that for all the expectation that last week's Federal Reserve rate hike might be the last, the strength of the US economy might mean that there may be one left to come," said Michael Hewson, chief market analyst at CMC.
The Fed's interest rate policy is seen as a key indicator for the US economy this year, with any further rate rises to tame inflation seen crimping growth.
Investors were also eyeing US debt levels after US Treasury Secretary Janet Yellen again warned Congress that there were "no good options" to avert a debt crisis other than raising the debt ceiling.
The Treasury is expected to run out of funds on 1 June, while Republicans are demanding significant spending curbs in order to approve an increase in the debt ceiling.
The US regional banking sector also remains a concern as shares in the troubled PacWest are down over 75% since the start of the year and not helped by the troubled California-based lender's decision to trim dividends this week.
China
Oil markets also wobbled after data showed China's crude oil imports slumped 17% on the month to 10.32 million bpd, a four-month low and around 1% lower than last year, as refinery turnarounds and falling product export margins slowed feedstock demand from refiners.
That drop comes as volumes pulled back from last month's three-year high, although the year-on-year fall also raised concerns.
Additionally, inbound shipments of broader goods and commodities to the world's second-largest economy dropped by 7.9%, while exports increased by 8.5% in the same period after an unexpected surge of 14.8% in March, customs data revealed Tuesday.
On the supply side, concerns were raised over the wildfires in Alberta, having prompted the evacuation of residents and shut down the oil pipeline system, which has halted at least 300,000 bpd equivalent of Canadian oil and gas production.
Meanwhile, hopes were rising that oil from northern Iraq would soon start flowing to Ceyhan, although there was no firm timetable as of now, prompting fears the dispute could rumble on.
