The US has purchased crude for its strategic reserves for two consecutive weeks, according to Danske Bank’s FX analyst Jens Nærvig Pedersen. While this supports the oil market after a price slump, the pace of buying remains slow due to current low prices.
Weakness in the US economy, an upcoming OPEC+ output increase, and trade policy uncertainties are contributing to a negative mood in the oil market. If US buying does not increase, challenges in the oil market are likely to persist in the near term.
Impact Of US Oil Purchases
This pattern of purchases does provide support to oil prices, though as Pedersen points out, the effect is muted by the pace at which purchases are being made. The ongoing economic softness in the United States, combined with additional supply from OPEC+, introduces fresh headwinds. On top of that, uncertainty surrounding trade policies adds complexity to the overall demand outlook.
Given that reserves are being filled gradually rather than aggressively, any boost to market sentiment remains limited. If buying does not pick up meaningfully, sellers may continue to hold the upper hand, especially as concerns about economic momentum linger.
Traders should pay attention to the supply increases from oil-producing nations, as an oversupplied market with weak demand does not create conditions for a rally. The rate at which the US continues adding crude to its reserves will be critical in shaping expectations. If purchases remain lacklustre, downside risks may persist, particularly if broader economic data worsens.
Those managing risks in this environment should monitor upcoming economic reports and trade policy shifts. If economic softness spreads further, the likelihood of continued oil price struggles grows. At the same time, should OPEC+ adjust strategy in response to price movements, positioning will need to reflect any shift in supply dynamics.
Potential Policy Impacts
Market participants should also be mindful of how policymakers respond to economic conditions. Central banks influence demand for raw materials through interest rate decisions, and any hints of policy change could reshape expectations. If rate-cut expectations grow due to a weaker economy, sentiment in commodities could shift accordingly.
For now, the balance of supply and demand remains delicate. Unless buying activity increases or other factors provide support, volatility could stay elevated in the weeks ahead.
