Oil prices increased, with ICE Brent rising by 0.31%. This uptick was influenced by a recovery in equity markets and a favourable inventory report from the Energy Information Administration (EIA).
The EIA reported a rise of 1.75 million barrels in US crude oil inventories, which is significantly lower than the 4.59 million barrel increase reported by the American Petroleum Institute (API). Cushing crude oil inventories decreased by 1 million barrels, and gasoline and distillate stocks fell by 527,000 and 2.81 million barrels respectively, marking three consecutive weeks of decline in US gasoline inventories.
Strategic Petroleum Reserve Considerations
The US Energy Secretary indicated that current crude oil prices might present a good opportunity to purchase oil for replenishing the Strategic Petroleum Reserve (SPR), which currently holds just under 396 million barrels. This is an increase from a low of 347 million barrels in 2023, but remains below the 621 million barrels recorded in mid-2021.
Refilling the SPR is estimated to require $20 billion and could take years, assuming a capacity of around 700 million barrels and a cost of about $65 per barrel.
Brent crude edged higher by 0.31%, helped along by a rebound in equities and a supportive inventory report from the EIA. The market’s reaction suggests that traders had braced for a more bearish figure, aligning with what the API had projected.
The Energy Information Administration stated that US crude inventories expanded by 1.75 million barrels, a considerably lower increase than the 4.59 million barrels reported by the API. Meanwhile, storage levels at Cushing declined by 1 million barrels. Gasoline stocks fell yet again, this time by 527,000 barrels, while distillates dropped 2.81 million barrels. That marks the third straight weekly decrease for US gasoline inventories, a factor that could bolster refiners’ margins if demand holds steady.
Impact On Commodity Markets
The US Energy Secretary’s comments on the Strategic Petroleum Reserve add another layer to the equation. Current prices could make stockpiling oil more appealing for the US government, given that the SPR remains well below its mid-2021 levels. Although it has recovered from its 2023 lows, bringing it back near historical volumes would be a slow and costly process. At $65 per barrel, refilling the reserve could require around $20 billion, with final costs fluctuating based on market conditions and future buying strategies.
For commodity traders, the supply dynamics in the US are only one part of the bigger picture. A measured rise in crude stockpiles, combined with falling gasoline and distillate inventories, could create a push-and-pull effect on prices. With US officials now considering replenishment efforts, even if spread out over several years, that introduces an element of potential dip-buying from the government.
