Oil Down On Biden Stock Draw But Market Remains Range-Bound

Meanwhile, OPEC continues to defend its output cut: File Image/Pixabay

Oil prices on Tuesday declined on the strength of the U.S.'s plan to release additional supplies from its strategic reserve, and at least one analyst observed that the price decline played into Washington's bid to alleviate prices at the pump.

Ed Moya, senior market analyst at Oanda Corp., said, "Crude prices declined as energy traders expect the [Joe] Biden administration to remain aggressive with further releases from its strategic oil reserves.

"With midterm elections less than a month away, president Biden wants energy prices trending in the right direction."

According to people familiar with the matter, the White House will release at least another 10 million to 15 million barrels of oil from the nation's emergency stockpile – essentially the tail end of a program announced in the spring to release a total of 180 million barrels of crude from the SPR.

The administration is also reportedly considering limiting fuel exports to keep more gasoline and diesel inside the U.S., although critics warned that such a move could lead to higher prices in parts of the country, particularly the import-reliant Northeast.

West Texas Intermediate for November delivery dropped $2.64 to settle at $82.82, while Brent for December settlement fell $1.59 to settle at $90.03.

Trading on Tuesday was described as a continuation of being range-bound, with time spreads signalling tightness in advance of the Organization of the Petroleum Exporting Countries' (OPEC) November production cutbacks, but weak demand in China and strong monetary policy from central banks impacting the market.

Specifically, China indefinitely delayed release of economic indicators originally scheduled to be published on Tuesday, which insiders said meant that fuel demand is significantly depressed in the region.

John Kilduff, founding partner at Again Capital, remarked, "It's not a good sign when China decides not to publish economic figures."

Also on Tuesday, OPEC continued to defend its output cuts: Suhail Al Mazrouei, oil minister for the United Arab Emirates, said the decision was motivated purely by supply and demand, and the drop in prices since the meeting shows it was the right one.

Also, Haitham Al-Ghais, secretary-general for OPEC, said the oil market faces "very real potential for a global recession, which some may say has already started….there was a consensus among the ministers regarding the need to act now and prevent a crisis later on."

The White House earlier accused OPEC of taking Russia's side in its war in Ukraine, but Gabriel Obiang Lima, oil minister for Equatorial Guinea, said, "It was a technical decision, it had nothing to do with politics."

The defence of OPEC unfolded at African Energy Week in Cape Town.