Despite reports that the United States is looking to offload oil out of its strategic reserves, oil prices dropped further on Thursday as Russia asserted that it was prepared to help bring about stability in the natural gas industry. Brent crude oil was down 16 cents, or 0.2 percent, to $80.92 per barrel by 1306 GMT, after hitting a session low of $79.08 earlier in the day. West Texas Intermediate (WTI) oil futures fell 30 cents, or 0.4 percent, to $77.13 per barrel after hitting a session low of $74.96. On Wednesday, both contracts dropped by 2%.
According to UBS expert Giovanni Staunovo, “If the United States deploys its significant oil reserves and if Russia can supply additional natural fuel, this might lead to less replacement from natural gas to crude, and the petroleum market could become less constrained.”
Prohibition of Petroleum Imports
Jennifer Granholm, the secretary of energy of the United States, stated on Wednesday that the government is contemplating drawing on the nation’s Strategic Petroleum Reserve (SPR) to help cool a spike in gas prices, according to the Financial Times. Granholm reportedly did not eliminate the possibility of reinstating the prohibition on petroleum shipments, which was previously eased in 2015.
In its year-end Brent pricing prediction, Goldman Sachs said an expected SPR release, which may total up to 60 million barrels, would only represent a $3 negative risk to its $90/bbl projection. A greater increase in crude stocks in the United States last week added to the downward pressure on prices. Stocks increased by 2.3 million barrels, according to the United States Energy Information Administration, compared to estimates for a little decline of 418,000 barrels. [EIA/S]
Russia to Assist Europe
President Vladimir Putin of Russia stated on Wednesday that his country is increasing gas exports to Europe, including through Ukraine, in reaction to the energy crisis and that his country is prepared to stabilize the market in the face of soaring energy prices. A move along these lines could assist in bringing record-high gas prices down.
Because of the approaching winter, experts expect that rising gas costs will influence the already constrained crude market, as some consumers move from gas to crude oil. Following an agreement by the Organization of the Petroleum Exporting Countries and their allies (OPEC+) earlier this week to remain with its plan to increase output by 400,000 barrels per day in November, crude prices surged to multi-year highs. According to insiders close to the group, OPEC+’s stance was influenced in part by concerns that global prices would dwindle.