WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange moved mixed early Tuesday following reports suggesting the Biden administration is planning to release another 10 million to 15 million barrels (bbl) from U.S. Strategic Petroleum Reserves to offset a large production cut announced by OPEC+ earlier this month that is seen further tightening market fundamentals.
Additionally, concerns over the health of the global economy and subsequent demand destruction across major economies in Europe, Asia, and North America have further weighed on the oil complex.
Bloomberg News reported Tuesday morning the Biden administration is considering a new sale of emergency crude oil from the nation's reserves to keep gasoline prices depressed ahead of midterm elections in November. The release would be an extension of the 180 million bbl drawdown program that started in the spring.
According to people familiar with the decision, the White House is now considering how to replenish commercial stockpiles and whether to limit oil exports. The potential sale would come 14 days after Organization of the Petroleum Exporting Countries together with Russia-led partners agreed to cut oil production by 2 million barrels per day (bpd) beginning in November.
According to various reports, the Saudi-led coalition defied calls from the Biden administration to not reduce oil production ahead of an EU embargo on Russian seaborne oil exports and G7 price cap on Russian energy sales that is expected to go into effect on Dec. 5. Russian officials have repeatedly warned that Moscow would halt all energy exports to any country that participates in a price scheme. At the very least, OPEC+ production cut has increased volatility in markets, and a G7-driven move to cap Russia's oil prices could instead result in a price spike.
For their part, OPEC+ officials defended the decision to cut oil production by 2 million bpd next month as a preemptive measure to counter accelerated demand destruction in some of the world's largest economies. Suhail al-Mazroui, United Arab Emirates Oil Minister, this morning said oil prices did not increase but stabilized after the OPEC+ decision.
Oil prices have declined over the past few months on concerns that the global economy is weakening, which will lower demand for fuel.
For the global economy, "The worst is yet to come," said International Monetary Fund Managing Director Kristalina Georgieva at a gathering of finance officials in Washington, D.C., last week, citing recessionary risks across many economies.
IMF forecast economies representing more than a third of global output will likely contract next year, while the world's three largest economies -- the United States, European Union, and China -- will essentially stall. Overall, IMF projects 2.7% growth in 2023, down from 3.2% this year.
Separately, the British government led by Liz Truss made a massive budget U-turn on Monday after appointing a new finance minister Jeremy Hunt, which included a reversal of her flagship tax cuts along with capping an energy price guarantee for UK households by a year to April 2023.
The British pound rallied, the euro jumped 1.24% against the U.S. dollar, while the greenback retreated below the key 112-level on Monday after Hunt erased most of the 45-billion pound "mini-budget" on Monday, sparking a rally in U.S. and UK bond markets.
In a statement to the House of Commons on Monday, Hunt stressed "We are the country that funds our promises and pays our debts. When it is being questioned by the markets, as it has been in recent weeks, this government will take difficult decisions to ensure that there is trust and confidence in our national finances."
As part of the U-turn, the British government said it would keep an energy price guarantee, which caps utility bills for the average household to £2,500 a year, until April 2023 instead of the two-year period.
Near 7:30 a.m. EDT, NYMEX November West Texas Intermediate futures traded little changed near $85.50 bbl, and ICE December Brent futures edged higher to $91.80 bbl. NYMEX November ULSD futures advanced 3.62 cents to $4.1214 gallon, and November RBOB futures declined 1.29 cents to $2.5802 gallon.
Liubov Georges can be reached at firstname.lastname@example.org