Tanker trucks sit in front of storage silos in Sunray, Texas, U.S., on Saturday, Sept. 26, 2020. After all the trauma the U.S. oil industry has been through this year — from production cuts to mass layoffs and a string of bankruptcies — many producers say they’re still prioritizing output over reducing debt. Photographer: Angus Mordant/Bloomberg
West Texas Intermediate dropped 0.8% after declining for three straight weeks, while Brent retreated. Senate Majority Leader Charles Schumer urged Biden at the weekend to release oil from the nation’s emergency reserves, saying that consumers needed immediate relief at the gas pump. A top administration aide, Brian Deese, declined to say whether the president would tap the SPR.
The global oil market has fixated in recent weeks on a potential release from the reserves after crude hit a seven-year high in October, lifted by a rebound in consumption from the impact of the pandemic. A plea by Biden for the Organization of Petroleum Exporting Countries and its allies to raise oil production more quickly was rebuffed, putting the focus on how the U.S. administration may respond as the pace of consumer price gains accelerates.
The challenge from inflation, especially gasoline, is a mounting political problem for Biden. The president’s approval rating sank to a new low, according to a Washington Post-ABC News poll. About half of Americans overall, as well as independents, blame him for accelerating inflation, it showed.
“There seems to be a limited number of cards the U.S. can use to fight inflation, which are an SPR release, rate hike, and easing restrictions on Iranian oil exports,” said Will Sungchil Yun, a senior commodities analyst at VI Investment Corp. “The quickest solution that has a longer-lasting impact would be Iran. That would push prices down with added supply.”
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After months of stalling, Tehran and Washington are set to return to Vienna on Nov. 29 to resume mediated talks to try to revive a nuclear deal. If successful, that may lead to the U.S. eventually ending sanctions on Iranian crude flows.
The call for action on the SPR underscores how Biden is facing pressure from his own party: Schumer is a Democrat who’s New York’s senior senator. Last week, eleven other Democratic senators urged the president to act on energy.
“The president has made clear that all options are on the table,” Deese, the director of the White House National Economic Council, told CNN at the weekend.
While oil markets remain backwardated — a bullish pattern marked by near-term contracts trading above longer-dated ones — that’s been easing off. Brent’s prompt spread was a $1.02 a barrel in backwardation Monday, narrowing from $1.34 two weeks ago.