Oil Pulls Back From Oversold Territory Amid A Mix Of Bullish And Bearish Signs

Meanwhile, the Biden administration considers yet another SPR draw: File Image/Pixabay

Proving yet again that logic isn't a strong suit in oil trading activity in 2022, crude prices recovered somewhat on Thursday - despite reports of waning demand and swelling U.S. stockpiles - mainly on the strength that the previous session's price tumble was deemed to be oversold.

West Texas Intermediate rose $1.60 to settle at $83.54, while Brent rose $1.15 to settle at $89.15 per barrel, after news broke that U.S. oil inventories rose 8.85 million barrels last week and gasoline demand sank below seasonal 2020 levels.

Dennis Kissler, senior vice president of trading at BOK Financial, said,  "Crude is trying to bounce off the lowest levels since March as the last two weeks' selloff in prices stemmed from a perceived slowdown in both Asia and Europe with expectations that demand destruction is coming."

Kissler went on to note that "The rising U.S. dollar to multi-year highs has been a big bearish factor to crude and with the Fed set to raise interest rates again, the strength looks to continue."

As for the U.S. inventory build, Phil Flynn, senior market analyst at Price Futures Group Inc., noted
that "Most of that oil in that build came from the Strategic Petroleum Reserve; the quicker we empty out the SPR, the bigger the draws are going to be in the future."

All of this unfolded amid signs of a bullish market, thanks to the WTI time spread widening on Thursday (due to inventories at Cushing, Oklahoma declining for a second straight week) and the Energy Information Administration raising its outlook for global oil demand and cutting its forecast for U.S. supply.

Fearing that oil prices will spike again later this year as the European Union sanctions against Russia take effect, officials within U.S. president Joe Biden's administration disclosed on Thursday that another oil release from the Strategic Petroleum Reserve could be enacted for November, December, or January – despite previous releases having little to no effect on prices at the pump.

The SPR has released a total of 173.8 million barrels since March, a figure that includes volumes associated with an earlier round of tenders.

While there's little doubt in analytical circles that oil prices will rise this winter due to the Russia sanctions, less certain are the negative effects these sanctions will have on the former Soviet Union: for example, India on Thursday revealed that Russian oil now makes up 12 percent of its overall crude purchases, a six-fold increase in the past few months. 

Also, assuming a stance that could hardly be described as cowed, Russian president Vladimir Putin threatened once more to completely stop all energy supplies to Europe, which he hinted would leave the continent to "freeze."