Oil futures kicked off the week on a soft note Monday, with the U.S. benchmark spending time below $80 a barrel, as traders assessed the possibility that the Biden administration will release crude from the Strategic Petroleum Reserve.
Crude-oil futures sold off in anticipation that the Biden administration may consider a release from the SPR, along with a “possible ban of oil and/or gasoline exports,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch. “The SPR release was promoted by Senate Majority Leader [Chuck] Schumer over the weekend.”
Schumer, D-N.Y., on Sunday said the administration should tap the reserve to help bring down gasoline prices ahead of the holiday season. Thanksgiving in the U.S., a busy travel period, is next Thursday.
An SPR release is “probably the likeliest scenario,” said Steeves. However, “it is likely to have only a short-term impact as it would be a fraction of global production and consumption,” he said.
“Moreover, it would be a one-off event rather than a sustained rise in output,” Steeves said. “It is likely the political aim of those promoting it to provide some relief through the holidays, so it could have that effect of a temporary retreat in prices.”
West Texas Intermediate crude for December delivery
fell 53 cents, or 0.7%, to $80.26 a barrel on the New York Mercantile Exchange after trading as low as $79.30. Front-month prices haven’t settled below the $80 mark since Nov. 4, FactSet data show.
January Brent crude
the global benchmark, was down 64 cents, or 0.8%, to $81.53 a barrel on ICE Futures Europe. Both grades fell for a third straight week last week.
The speculation around a potential SPR release appears to have done little to shake up key members of Organization of the Petroleum Exporting Countries, or OPEC. Energy ministers from Saudi Arabia and Oman over the weekend said they saw no need for OPEC and its allies — a group known as OPEC+ — to speed up production increases beyond the monthly increments of 400,000 barrels a day they have already penciled in.
There’s also been talk that the U.S. may consider a ban on oil exports as a way to help ease gasoline prices.
“The export ban is a thornier issue and could actually cause problems if there were to be reciprocation by others,” said Steeves. “A lot of the heavier crude oil produced in the U.S. is exported because Gulf Coast refiners don’t want it. That wouldn’t help raise output of lighter crude.”
A stronger U.S. dollar has also weighed on crude. The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.3% Monday and has rallied 1% in November, hitting a nearly 16-month high.
A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.
December natural gas
traded at $4.957 per million British thermal units, up 3.5%.