Oil Prices Surge Following U.S. Strategic Reserve Purchase Announcement
Oil prices experienced a slight increase on Tuesday following the U.S. announcement of oil purchases for the Strategic Petroleum Reserve (SPR), recovering from a significant drop on Monday. This move aims to bolster reserves after a period of releases intended to stabilize prices.
Brent crude oil futures rose by 44 cents, or 0.6%, to $71.86 per barrel, while U.S. West Texas Intermediate crude climbed 45 cents, or 0.7%, to $67.83 per barrel. This increase followed a 6% decline on Monday, marking the lowest levels since October 1. The drop was a response to Israel's military actions over the weekend targeting Iran, although avoiding strikes on the country's oil facilities.
The U.S. government's plan involves acquiring up to 3 million barrels for the SPR and extending deliveries until May of next year. This purchase could deplete existing funds for further acquisitions unless Congress approves additional financing.
Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, noted that tensions in the Middle East remain high, although the market anticipates a temporary pause in the mutual attacks between Israel and Iran. Kikukawa also remarked that the SPR purchase is providing some support to the market. However, he suggested that oil prices may face downward pressure in the future due to waning winter kerosene demand and continued weak demand in China.
Over the weekend, Israel conducted a series of airstrikes targeting missile production facilities and other military sites in Iran. The precision of the attacks, which avoided Iran's nuclear and oil infrastructure, helped assuage concerns about a broader conflict disrupting oil supplies.
Despite the attacks, tensions remain elevated. Iranian Foreign Ministry spokesman Esmaeil Baghaei stated on Monday that Iran would use "all available means" to respond to Israeli assaults. The U.S. also warned that any aggressive actions by Iran against Israel or U.S. interests in the region would have "severe consequences."
In related news, preliminary forecasts in the U.S. show an increase in crude oil and gasoline inventories last week, while distillate stocks declined. The American Petroleum Institute is set to release its weekly report today, with the Energy Information Administration to disclose its findings on Wednesday. These reports are closely monitored by market participants for insights into supply and demand dynamics.