Oil Prices Rebound After Previous Session’s Plunge
U.S. plan to purchase oil for Strategic Petroleum Reserve offers market support amid Middle East tensions
Oil prices saw a slight increase on Tuesday following a significant drop in the previous session, supported by a U.S. plan to purchase oil for the Strategic Petroleum Reserve (SPR) while investors remained attentive to developments in the Middle East.
Brent crude futures rose by 44 cents, or 0.6%, reaching $71.86 a barrel as of 0025 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude gained 45 cents, or 0.7%, to settle at $67.83 a barrel.
Both crude contracts fell by 6% on Monday, marking their lowest levels since October 1, following Israel’s military response to Iran over the weekend, which notably avoided targeting Tehran’s oil infrastructure.
On Monday, the U.S. announced plans to acquire up to 3 million barrels of oil for the SPR, with deliveries expected through May of the following year. However, this purchase would limit the government’s ability to acquire additional oil until new funding is approved by lawmakers.
“Despite the alarming situation in the Middle East, the market anticipates a temporary pause in retaliatory strikes between Israel and Iran,” noted Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities. He added that while the U.S. plan to replenish the SPR has provided some market support, a downward trend is likely as the peak demand season for winter kerosene in the Northern Hemisphere is still some time away and Chinese demand remains weak.
On Saturday, a series of Israeli airstrikes targeted missile factories and military sites near Tehran and in western Iran, which were more focused on military objectives, alleviating concerns that Israel might strike Iran’s nuclear facilities or oil infrastructure.
However, tensions remain high, with Iranian Foreign Ministry spokesperson Esmaeil Baghaei stating that Iran will “use all available tools” in response to Israel’s recent attack. The U.S. also issued a warning at the United Nations Security Council about “severe consequences” for any further aggressive actions taken by Iran against Israel or U.S. personnel in the region.
In the U.S., crude oil and gasoline stockpiles are expected to have risen last week, while distillate inventories are anticipated to have decreased, according to a preliminary Reuters poll conducted on Monday. The American Petroleum Institute is set to release its weekly report on Tuesday, followed by the Energy Information Administration’s report on Wednesday.
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