Crude oil price outlook amid talks of US SPR releases

Crude oil price has edged lower as the US considers making yet another release from its Strategic Petroleum Reserve (SPR).  The bulls are defending the support at the psychological level of $100 with WTI futures trading at $101.27 as at the time of writing.

Fundamentals

Earlier in March, Biden’s administration announced its plan to release 30 million barrels from its SPR. Prior to that, in November 2021, it publicized its intentions to release 50 million barrels.

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President Biden is expected to announce the plan for the SPR release later on Thursday. On the one hand, the amount will be significant enough to improve the market sentiment. However, if history is anything to go by, it would only be a temporary fix to the soaring crude oil price.  

Data released by the Energy Information Administration (EIA) on Wednesday showed that gasoline stockpiles had increased by 785,000 barrels for the week ending on 25^th March. Notably, this was the first weekly build since January. Analysts had expected a draw of 1.744 million barrels.

The surprise build in gasoline inventories comes at a time when US pump prices are at a record high. As at Wednesday, the prices averaged above $4.23 per gallon, which is slightly below the all-time high of $4.33 hit earlier in the month.

In the ensuing sessions, investors will remain keen on the US stockpiles in relation to pump prices. Analysts have asserted that demand destruction is the only solution to the high crude oil price. As such, the focus will be on whether the high prices will lower oil consumption.

In the near term, the market will be reacting to OPEC+ decision on May’s production policy. The alliance, which consists of OPEC and its allies – including Russia – are set to meet on Thursday.

In its last meeting, which was just before Russia’s attack on Ukraine, the organization concluded its discussion in just 13 minutes. It agreed to continue with its modest output increase of 400,000 bpd despite calls from the US and other consumers to increase production in an attempt to ease the tight market.

In today’s meeting, it is expected to agree to a output increase of 430,000 bpd. Interestingly, some of its members are still struggling to meet their set quotas.