Oil Tanks On Worry Over Biden Initiatives As Demand Continues To Soar

However, chances of SPR oil being released seem less likely: File Image/Pixabay.

Oil on Wednesday fell 3.3 percent, the biggest drop in a week, due partly to a rising U.S. dollar and as industry data differed on the state of domestic crude stocks falling last week.

However, Bob Yawger, director of energy futures for Mizuho, said the big reason for oil prices tanking  was U.S. president Joe Biden asking the National Economic Council to work to reduce energy costs and the Federal Trade Commission to push back on market manipulation in the energy sector in an effort to reverse inflation, which was revealed in the U.S. to be rising at a 6.2 percent year-over-year rate, the fastest rate in three decades.

West Texas Intermediate fell $2.81 to settle at $81.34 per barrel, while Brent declined $2.14 to settle at $82.64 per barrel after an Energy Information Administration report showed that inventories rose by 1 million barrels in the most recent week, short of estimates for a 2.1 million build.

This contradicted earlier American Petroleum Institute data showing U.S. crude stocks declining by 2.5 million barrels for the week to November 5.

Vivek Dhar, analyst at Commonwealth Bank, said in a note, "The EIA report...does curb concerns that the U.S. will release oil from its Strategic Petroleum Reserve (SPR)."

But even given the stock build, overall growing demand – which not too long ago caused jubilation in trading circles but is now a source of angst given supply's inability to catch up – is hardly confined to the U.S.: while Asia jet fuel refining margins dipped on Wednesday, they stayed close to multi-month highs achieved in recent weeks on recovering aviation demand.

Cash premiums for jet fuel JET-SIN-DIF rose to 35 cents per barrel to Singapore quotes, compared with 27 cents per barrel on Tuesday.

Meanwhile, trading in the days ahead will likely be influenced by Biden being pressured even by fellow Democrats to combat high prices at the pump with a ban on oil exports, a move that dismayed Kevin Book, managing director of research firm ClearView Energy Partners.

He noted,  "If you block crude and cause an artificial drop in the WTI price, you probably hurt the driller more than you help the driver.

"There is more for the U.S. economy to gain from investment in the oil patch than savings in the service aisle."