Petroleum prices decreased to the lowest level of two weeks on Thursday Thursday with China’s state oil reserves releasing strategy. The U.S. weekly crude draw has been smaller than expected and U.S.Treasuries rallied when investors sought safer assets.
On Thursday in volatile trade, the Brent futures decreased by $ 1.15 or 1.6% to $ 71.45 per barrel. West Texas Intermediate (WTI) crude oil decreased by $ 1.16 or 1.7% to $ 68.14. This was the lowest compromise value for both since August 26.
A tremendous auction in the 30-year bond with the lowest interest rate print since January put a significant scare into the oil market in what looks like a flight to safety.
After falling over $1 a barrel early in the session, both benchmarks turned positive following reports that a ship was stuck in the Suez Canal. The ship was re-floated and did not cause any delays.
Oil held its gains following U.S. reports’ showing a much bigger-than-expected gasoline draw and on the continued slow return of U.S. production after Hurricane Ida.
However, oil futures fell over $1 a barrel again soon after strong demand in the afternoon $24 billion U.S. 30-year bond auction pushed yields down to 1.91%. Investors sold riskier assets like oil and stocks.
China’s state reserves administration announced that it would release crude reserves in phases via public auction to help domestic refiners’ control costs.
China began to use state oil reserves for the first time. It is a great news to get support from China’s crude oil reserves and this opportunity will provide a relief to domestic refineries and chemistry companies.However, the oil prices decreased to the lowest level of two weeks on Thursday with the news about reserves.
The EIA data shows that the US crude oil decline is less than the survey expectations, and the decline in gasoline is more than expectations.
U.S. crude stockpiles declined by 1.5 million barrels in the week to Sept. 3, according to government data, much less than the 4.6-million barrel draw analysts forecast.
7.2 million barrels decrease more than expected in gasoline stocks supported petroleum prices. Analysts predicted that gasoline stocks would only decrease 3.4 million barrels.
The open sea wells of the Gulf make up to 17% of the US production, however, aproximately 1.4 million barrels per day of crude production was still closed.
Royal Dutch Shell PLC declared force majeure in some oil deliveries due to damage caused by IDA. Also Shell is considering to force its workers with COVID-19 vaccination in some operations, or raising the risk of being dismissed.
With the increase in COVID-19 cases in the US, President Joe Biden is expected to consider new approaches to get the pandemia under control, including all federal employees.
Several U.S. airlines warned of a slowdown in ticket sales and cut revenue forecasts as the coronavirus Delta variant threatens the travelling.
