Analyst also argue on whether the market is headed for more price highs or waning demand: File Image/Pixabay
Although highly criticized as ineffective, the persistent worry that U.S. president Joe Biden will release crude from his country's Strategic Petroleum Reserves to help alleviate high energy prices motivated traders on Tuesday, causing oil prices to rise and fall before settling with mixed outcomes.
West Texas Intermediate settled at $80.76 per barrel, the lowest in more than a week, while Brent increased 38 cents to end the session at $82.43 per barrel.
Ed Moya, senior market analyst at Oanda Corp, remarked, "It seems the energy market is convinced that even if the U.S. resorts to tapping the strategic petroleum reserve, the benefits would be minimal."
International Energy Agency
A reprieve from the price rally could be on the horizon
Indeed, speaking before the U.S. Senate Energy and Natural Resources Committee, Stephen Nalley, acting administrator at the Energy Information Administration, said an SPR release would lower prices fleetingly: "Our analysis shows that it's generally short-lived - a couple of months - and that typically the other dynamics in the market would overtake any decrease in price."
Instead, James Bullard, president of the Federal Reserve Bank of St. Louis, said the Federal Reserve should go in a more hawkish direction to manage inflation, with the pullback of support for the economy causing a stronger dollar and a corresponding drop in commodity prices.
Meanwhile, the American Petroleum Institute on Tuesday reported that U.S. crude supplies rose 655,000 barrels last week but that stockpiles in storage hub of Cushing, Oklahoma declined by about 491,000 barrels; Washington will release its weekly inventory tally on Wednesday, but John Kilduff, founding partner at Again Capital, noted, "We're still on the cusp of winter, which is the peak demand season and there's still a bullish undertone to the market."
But the market is also rife with severely conflicting opinions: while Jeremy Weir, CEO and chairman of energy trading giant Trafigura Group, called the oil market "very, very tight" and said $100 per barrel is likely in the longer term, the Organization of the Petroleum Exporting Countries (OPEC) said the opposite is true.
Mohammad Barkindo, secretary general for the cartel, stated that the global oil market will switch from being under- to over-supplied as early as next month, due to what he predicts will be a waning of the economic rebound from the pandemic (OPEC has repeatedly expressed its worry that Covid-19 cases will escalate rather than retreat).
Pandemic aside, global oil output increased by 1.4 million barrels per day (bpd) last month and will add 1.4 million more over the next six weeks December as the Gulf of Mexico restores supplies and shale players exploit higher prices to boost drilling; "The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon," the International Energy Agency wrote in its latest monthly report.