DTN Oil

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Tuesday's session with losses between 1.5% and 3%, pressured by reports the Biden administration is planning to offer for sale the final tranche of the 180 million bbl of crude oil from the Strategic Petroleum Reserve announced in March, while investors await the weekly release of U.S. inventory data that is expected to show another large build occurred in domestic crude oil inventories.

U.S. commercial crude oil inventories likely increased by 1.7 million bbl during the week-ended Oct. 14, with market consensus ranging from a decrease of 2 million bbl to an increase of 3 million bbl. If confirmed, the build would follow an outsized 9.9 million bbl increase in commercial crude stockpiles in the previous week. Much of that build was realized on the back of a 7.7 million bbl drawdown from the SPR.

Gasoline stockpiles, meanwhile, are expected to have decreased 1.4 million bbl last week, while stocks of distillates are seen to have fallen by 2.2 million bbl. Refinery use likely declined by 0.5% from the previous week to 89.4% of capacity.

The American Petroleum Institute will release its weekly inventory report 4:30 PM ET, followed by official data from the U.S. Energy Information Administration Wednesday morning.

U.S. President Joe Biden is expected to announce as soon as Wednesday plans to release between 10 and 15 million bbl of crude oil from the SPR, which would complete the 180 million bbl Biden pledged to release on March 31 in response to Russia's invasion of Ukraine. The delivery of about 165 million bbl of SPR crude will be completed by the end of October, while a separate SPR sale for 10 million bbl of crude announced in September will be delivered in November.

The latest SPR action could be announced during a speech Biden is said to deliver Wednesday to address rising gasoline prices, which might also provide details on plans to replenish the emergency reserves. The Energy Department announced in May it was planning a new method of buybacks for the SPR that would allow for a "competitive, fixed-price bid process," with prices potentially locked in well before crude is delivered.

EIA last reported SPR crude inventory at 408.7 million bbl as of Oct. 7, having fallen below commercial crude stockpiles that last totaled 439.1 million bbl. SPR crude oil totaled 617.77 million bbl on Oct. 1, 2021.

Biden's speech will come two weeks after Organization of the Petroleum Exporting Countries together with Russia-led partners agreed to cut oil production by 2 million 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 the 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.

At settlement, NYMEX November West Texas Intermediate futures dropped back $2.64 or 3% to $82.82 bbl, and ICE December Brent futures declined to $90.03 bbl, down $1.59 bbl. NYMEX November ULSD futures retreated 9.17 cents to $3.9935 gallon, and November RBOB futures pulled back 4.25 cents to $2.5506 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com