Oil Prices Supported By Bargain Hunters As SPR Release Keenly Anticipated

But one analyst says Biden continuing to do nothing may be the best solution: File Image/Pixabay

Oil futures on Thursday eked out gains of 0.8 percent based purely on bargain hunter activity as Brent and West Texas Intermediate fell below their 50-day moving averages in the previous session.

Spencer Vosko, director for crude oil at Black Diamond Commodities, said, "With lots of political talk trying to chase the market lower, WTI seems to be getting some support at $78, for now, after coming off from the mid-$80s last week."

WTI on Thursday rose 65 cents to settle at $79.01 per barrel, while Brent rose 96 cents to settle at $81.24 per barrel.

As has been the case for the week, all eyes are on whether the U.S. will tap its Strategic Petroleum Reserves in an effort to reduce domestic prices, however minimal the impact would be: "It feels like the SPR release will happen soon, it's just a question of when it happens and how much crude they release," said Giovanni Staunovo, commodity analyst at UBS Group.

Meanwhile, China said it is working on releasing some of its reserves oil, and more details on the volume and date of release are forthcoming.

However, Michael Tran, managing director of global energy strategy at RBC Capital Markets, on Thursday suggested that U.S. president Joe Biden doing nothing but trying to talk down the price of oil seems to be working and that he may be buying time in the hopes that as trading activity drops during the Christmas season, prices will ease on their own.

Tran said, "The bark may turn out to be worse than the bite: the strategy of talking down the market may end up having a larger impact than the element of surprise," and he noted that U.S. crude futures have declined about 7 percent since Oct. 26.

For her part, Michele Pedroni, fund manager at DECALIA in Geneva, welcomed the turnaround: "After flying with fantasy forecasts of oil reaching $150 over the past few months, we are now coming back down to earth: Oil prices remain a declining asset class and this is a sector where there are fewer investments."

Pedroni added with regards to reports on Thursday that oil company shares dropped between 1.4 percent and 2.3 percent (for Royal Dutch Shell, TotalEnergies, and BP), "Even though oil demand remains good today's news has rung the first alarm bell to start scaling back the rally that we've seen over the past few months."