Oil on longest weekly run of drops since March amid SPR pressure

President Biden kept investors guessing about whether he'll act to tame oil prices

Oil headed for its longest run of weekly losses since March as President Joe Biden kept investors guessing about whether he’ll act to tame prices that have helped to stoke a surge in US inflation, hurting consumers.

West Texas Intermediate fell 1.9 per cent, putting crude on course for a third weekly fall. Biden is weighing moves that include releasing oil from the Strategic Petroleum Reserve to try to bring down the cost of gasoline at the pump, which has hit a seven-year high.

For several weeks, a small group of his top aides has discussed possible moves, according to people familiar with the matter. Consensus has been elusive, with some Energy Department officials pushing back against tapping the SPR while White House aides lobby for a release -- or even halting US crude exports.

Oil has marched higher this year as consumption rebounded from the impact of the pandemic, contributing to the fastest US consumer price inflation in three decades. While prices are feeling the pressure of reserve releases in the short-term, options contracts changed hands Thursday that would profit buyers from a spike up to $250. 

Facing rising political pressure to act, Biden is weighing his options for intervention even though the Energy Information Administration pointed to weaker balances next year. The challenge facing Biden over gasoline costs is particularly apparent in California, the state where drivers typically pay more for the fuel than anywhere else in the US Retail prices now average $4.65 a gallon, just 2 cents shy of the record set in 2012, according to AAA data. 

“Headwind is being generated by a significantly firmer US dollar and speculation about a release of strategic oil reserves in the US,” said Carsten Fritsch, an analyst at Commerzbank AG. “If OPEC+ wants to avoid an oversupply, it will need to rethink its production plans for next year.”