Oil dips from six-week low with China working on reserve release

Oil edged lower, extended declines from a six-week low, as China said that it’s carrying out work on a release of crude from strategic reserves.

West Texas Intermediate declined 0.6 per cent, after earlier falling as much as 1.6 per cent. The move suggests the world’s two biggest oil consumers are willing to work together to keep a lid on energy costs. It follows a virtual summit between U.S. President Joe Biden and his Chinese counterpart Xi Jinping earlier this week in which energy supplies were discussed.

With the global economy gripped by rising levels of inflation, key oil consumers are trying to bring down prices. The International Energy Agency said this week that some of current tightness in the market is starting to ease as global production picks up, and the volume of oil being transported at sea has picked up sharply in recent weeks.

“It feels like the SPR release will happen soon,” said Giovanni Staunovo, commodity analyst at UBS Group AG. “It’s just a question of when it happens and how much crude they release.”

Prices

  • WTI fell 0.6 per cent to $77.91 a barrel at 10:15 a.m. in London.
  • Brent lost 0.3 per cent to $80.06 a barrel

China tapped its national crude stockpiles earlier this year to bring domestic prices down, and also made a private sale from the reserves. On Thursday, the reserve bureau’s spokeswoman said that more details on the volume and the date of sale would follow on its website in due course.

In the physical market, jitters over China’s crude demand are spreading as spot premiums of a key Russian grade favoured by Chinese independent processors tumbled by more than a $1 a barrel due to the likelihood of another tax probe, according to traders. Earlier this week, the grade had been traded at the highest premium since January 2020.

© 2021 Bloomberg L.P.

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