(Bloomberg) — Oil fell after the Department of Energy said its plan to restock US emergency oil reserves doesn’t include a trigger price, and that the deliveries likely won’t happen until after fiscal year 2023.
West Texas Intermediate slipped below $85 a barrel as traders digested the Energy Department’s statement. Earlier this week, futures rallied after Bloomberg News reported that administration officials have discussed refilling the Strategic Petroleum Reserve should crude dip below $80, suggesting a potential floor for prices.
“The White House sending mixed messages on the strategic reserve has pushed this market up and down,” said Phil Flynn, senior market analyst at Price Futures Group. “They’re putting out some trial balloons to see how their buying is going to impact prices.”
Meanwhile, China is considering exporting more fuel, a move designed to boost the economy but which also raises questions about how much domestic consumption is falling amid Covid lockdowns. The news comes after the International Energy Agency said Wednesday the country will see its biggest drop in demand for oil in more than three decades this year.
Oil is on course for the first quarterly loss in more than two years as central banks including the Federal Reserve tighten monetary policy to tame inflation, hurting the outlook for energy consumption. The retreat has erased all the gains seen in the wake of Russia’s invasion of Ukraine, with prices earlier this month hitting the lowest level since January.
Crude products prices have also declined significantly in the few past days on seasonal demand declines while China prepares to ramp up fuel exports. Diesel’s prompt spread dropped to $2.96, down from $7.45 earlier this month. The diesel crack, which measures diesel futures relative to crude oil contracts, plummeted to its lowest in over a month.
Widely watched oil market time spreads have been volatile. Brent’s prompt spread — the difference between its two nearest contracts — was 96 cents a barrel in backwardation. That compared with 90 cents a week ago, while the measure was more than $2 as recently as last month.
©2022 Bloomberg L.P.