The oil market was down on Tuesday amid tight supply worries, a possible recession, and China’s COVID-19 curbs, causing the Brent crude to decline by 14 cents or 0.28 per cent to $113.56 per barrel, with the United States West Texas Intermediate (WTI) crude shedding 52 cents or 0.87 per cent to $109.77 per barrel.
Yesterday, the US Energy Secretary, Ms Jennifer Granholm, said President Joe Biden had not ruled out using export restrictions to ease soaring domestic fuel prices.
This was after she was asked if the United States was considering restricting petroleum exports to ease fuel prices. “I can confirm the president is not taking any tools off the table,” she said.
The United States exported around 8.6 million barrels per day of oil and refined products in 2021, slightly more than it imported and now the Biden administration has been struggling to combat inflation, including record pump prices, as demand rebounds from the depths of the COVID-19 pandemic and supply has been disrupted since Russia’s invasion of Ukraine.
Another reason for the fall in prices on Tuesday was the worries about threats to the global economy, the main theme of the Davos meeting this week.
Political and business leaders gathered for the World Economic Forum (WEF) against a backdrop of inflation at its highest level in a generation in major economies and they agree that the repercussions on the oil market of Russia’s invasion of Ukraine and COVID-19 lockdowns in China with no clear end have worsened the situation.
Meanwhile, Beijing is stepping up quarantine efforts to end its COVID-19 outbreak while Shanghai’s lockdown is due to be lifted in a little more than a week.
Prices earlier were supported as the European Union (EU) moved closer to agreeing to a ban on Russian oil imports.
France’s new foreign minister, Ms Catherine Colonna said on Tuesday she was optimistic that those still opposed to a new EU sanctions package that would phase out Russian oil imports to the bloc could be convinced.
She also added that the bloc would strike a deal that would have the effect of tightening global supply.
Travel during the upcoming US Memorial Day weekend is expected to be the busiest in two years as more drivers hit the road and shake off coronavirus lockdowns despite high pump prices.
Meanwhile, the American Petroleum Institute (API) reported a small build this week for crude oil of 567,000 barrels, which put pressure on crude oil prices.
The draw comes even as the US Department of Energy released 6 million barrels from the Strategic Petroleum Reserves in Week Ending May 20.
US crude inventories have shed some 75 million barrels since the start of 2021 and about 18 million barrels since the start of 2020, according to API data.
Official government data from the US Energy Information Administration (EIA) will be released on Wednesday.