Oil falls as US sells crude from its strategic reserve

Chennai — Oil prices fell on Tuesday after the US government said it would release more crude from its strategic petroleum reserve as mandated by legislators, defying expectations from some traders that the release could be cancelled or delayed.

Brent crude futures fell by 70c, or 0.81%, to $85.91 a barrel by 2.56am GMT, while US crude futures fell by 93c, or 1.16%, to $79.21 a barrel.

The US department of energy said after the previous session ended that it would sell 26-million barrels of oil from the strategic petroleum reserve, a release that was likely push the reserve to its lowest level since 1983.

“Energy traders were expecting to hear news about refilling the strategic petroleum reserve and not tapping them for more supplies,” Edward Moya, an analyst at Oanda said.

The department of energy had considered cancelling the fiscal year 2023 sale after US President Joe Biden’s administration last year sold a record 180-million barrels from the reserve. But that would have required Congress to act to change the mandate.

Traders will be looking for clues from Tuesday’s US consumer price index (CPI) data for January. US monthly consumer prices rose in the previous two months instead of falling as previously estimated, raising the risk of higher inflation readings in the months ahead.

“Any higher-than-expected data may cause a renewed sell-off in risk assets, including oil,” Tina Teng, an analyst at CMC Markets said.

Supply concerns also eased after the US energy information administration said it expected record March production from the seven biggest US shale basins. Elsewhere, crude exports resumed at a Turkish port after a devastating earthquake rocked the region.

“Oil is on the defensive and it could get uglier if inflation proves to be harder to tame,” Oanda’s Moya said.

Reuters