Oil Pares Gains as U.S. Comments Counter Signs of Strong Market

(Bloomberg) -- West Texas Intermediate pared earlier gains after U.S. Energy Secretary Jennifer Granholm told MSNBC that President Joe Biden may make an announcement to address high oil and gasoline prices this week. 

Granholm didn’t specify any particular measures, but the U.S. has said that releasing crude from the Strategic Petroleum Reserve is one option it’s considering to cool prices. The Biden Administration will be scrutinizing a monthly U.S. report published on Tuesday, according to Granholm. 

Those comments came as prices rallied after Saudi Arabia made some of the biggest increases to its official selling prices in decades at the end of last week. In a sign of a strong market, Asian buyers will probably take their full contractual volumes of oil next month, despite the higher costs.

Oil remains in the $80s after the Organization of Petroleum Exporting Countries and its allies ignored calls to lift output by more than a planned 400,000 barrels a day. That has traders waiting to see whether the U.S. will release some of its SPR in a bid to cool prices. 

“The combination of an under-supplied oil market, low OECD inventories and the global energy crunch should keep oil prices at $80-$90 a barrel for the rest of the year,” said Helge Andre Martinsen, senior oil analyst at DNB Bank ASA. 

There is little sign of bullish sentiment wavering in the market so far. Money managers still hold more than ten bullish bets for every bearish one in WTI, while nearby time spreads are in backwardation of more than $1 a barrel, indicating tight supply.

Adding to Monday’s positive sentiment was another jump in European natural gas prices on signs that Russia might not be delivering a promised boost to supply. Switching from gas to oil has already boosted consumption, and BP Plc said last week that demand is back at 100 million barrels a day. 

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