By Barani Krishnan
Investing.com - Crude prices rebounded from six-week lows on Thursday as market participants bought back contracts oversold in the previous session.
But the notion that China was readying to release some of its oil reserves in an apparent collaboration with the United States to fight back against OPEC output cuts held the market back from immediately reprising its recent highs.
West Texas Intermediate, the U.S. crude benchmark, was up $1.22 cents, or 1.6%, to $78.77 per barrel by 1:30 PM ET (18:30 GMT).
London-traded Brent crude, the global benchmark for oil, rose $1.03, or 1.3%, to $81.31.
WTI and Brent fell around 3% on Wednesday on reports that the Biden administration had lobbied China and other oil consuming countries to join Washington in coordinating sales of crude from their reserves, after the Organization of the Petroleum Exporting Countries repeatedly rebuffed their pleas for more supply.
Crude prices are up as much as 60% on the year as the Saudi-led 13-member OPEC and 10 other oil producing countries steered by Russia hold about 5.0 million barrels of regular supply from the market as part of output cuts carried out since the height of the Covid-19 pandemic.
Reports about the Biden administration’s lobby for a coordinated global action on oil reserve sales coincided on Wednesday with data from the Energy Information Administration showing a release of 3.2 million barrels from the U.S. Strategic Petroleum Reserve.
While the two weren’t connected, oil markets came under undue pressure from the implication that consuming nations weren’t about to continue taking crude from OPEC at current prices without a fightback.
China’s National Food and Strategic Reserves Administration confirmed on Wednesday that it was working on a release of crude from its reserves, though it did not comment on the U.S. initiative. Separately, President Joe Biden renewed his call on regulators to crack down against the “illegal” collusion behind U.S. pump prices, also retailing at seven-year highs.
With no follow-up from China on Thursday over its reserves sale, crude prices climbed back from the previous day’s lows.
“People figured that things got a little oversold and it was time for a correction higher,” said John Kilduff, founding partner at New York energy hedge Again Capital. “But to be sure, there’s fear now that the consumers might band together to fight back against OPEC, and that could keep the market from reprising the year’s highs.”
Week-to-date, WTI is down 2.6% after a 4% drop in three prior weeks. For the year though, the U.S. crude benchmark remains up 62%, after hitting seven-year highs above $85 in mid-October.
Brent is down 1% week-to-date, also after losing 4% in three previous weeks. The global crude benchmark remains up 56% on the year after scaling a three-year high above $86 last month.