Tokyo — US oil was under pressure on Thursday, adding to an overnight plunge on a Reuters report that the US was asking major oil consumers like China and Japan to consider a co-ordinated release of oil reserves to lower prices.
The bid by the US administration to shock markets comes as inflationary pressures, partly driven by surging energy prices, starts to produce political backlash, as the world fitfully recovers from the worst health crisis in a century.
US crude was down 62 US cents or 0.8% at $77.74 a barrel by 1.35am GMT, having fallen 3% overnight. Brent crude fell 39 US cents or 0.5% to $79.89 a barrel after falling 2.6% to the lowest close since early October on Wednesday.
Prices hit seven-year highs in October as the market focused on the swift rise in demand that has come with lockdowns being lifted and economies recovering against a slow increase in supply from oil cartel Opec and its allies, called Opec+.
“Should the US administration order an SPR [strategic petroleum reserve] release, that could send a strong political sign,” Citigroup analysts said in a note.
“But … domestic refineries are unlikely to get an extra benefit, as light-end yields appear to have been already maxed out,” they added, referring to margins for producing petrol and other motor fuels.
US producers have also been reluctant to overspend on drilling after they were punished by investors for gorging on debt to pay for new drills.
The International Energy Agency and Opec have said in recent weeks that more supply will be available in the next several months. Opec is maintaining an agreement to boost output by 400,000 barrels per day every month so as not to flood the market with supply.