Oil prices declined on Tuesday over reports that US President Joe Biden may order the release of crude oil from his country’s emergency stocks to prevent further increases in energy prices, a move that major oil producers of OPEC+ are expected to respond to by changing their production scheme.
International benchmark Brent crude was trading at $79 per barrel at 0619 GMT for a 0.87% loss after closing the previous session at $79.70 a barrel.
American benchmark West Texas Intermediate (WTI) was at $75.85 per barrel at the same time for a 1.17% loss after trade ended at $76.75 a barrel in the previous session.
Since the Organization of Petroleum Exporting Countries (OPEC) and its allies, also known as OPEC+, refused repeated requests from Biden to produce more to bring skyrocketing fuel prices down, the president has been in search of a solution which includes oil sales from the country’s Strategic Petroleum Reserves (SPR).
However, experts say and technical data shows that the county may bring as much as 400,000 barrels per day (bpd) of sweet crude to the market by the end of the year.
Goldman Sachs said on Monday that the White House’s push for oil releases from national reserves is already fully priced into the market following the drop in crude prices in recent weeks.
In his last move, Biden called on some major oil-consuming countries, including India, Japan and South Korea to tap into their SPR.
Although Japan said it would consider this option, legal restraints may prevent it from doing so, as the country's laws can only release reserves at a time of supply constraints or natural disasters, but not to lower prices.
According to recent reports, Biden may order the release of oil from the SPR on Tuesday. However, OPEC unofficially said in the event of a combined SPR release by a US-led initiative, the group may adjust its production to produce less than originally planned to offset the impact of SPR releases.
On the demand side, the resurgence of COVID-19 cases in European countries and subsequent mitigation efforts are exerting more pressure on prices.
By Sibel Morrow