Crude oil up as US seeks to replenish strategic reserves

Crude oil futures gained on Monday morning following the US Energy Department’s decision to replenish strategic oil reserves in that country.

At 9.57 am on Monday, February Brent oil futures were at $76.34, up by 0.66 per cent; and January crude oil futures on WTI (West Texas Intermediate) were at $71.65, up by 0.59 per cent.

December crude oil futures were trading at ₹5,982 on Multi Commodity Exchange (MCX) in the initial trading hour of Monday morning against the previous close of ₹5,935, up by 0.79 per cent; and January futures were trading at ₹6,021 as against the previous close of ₹5,975, up by 0.77 per cent.

The US Energy Department’s Office of Petroleum Reserves has announced a solicitation for up to 3 million barrels of oil for delivery to the strategic petroleum reserve (SPR) in March 2024. It said this is a continuation of the department’s strategy of consistent solicitations aimed at purchasing oil when it can purchase at a good deal for taxpayers: a price of $79 dollar a barrel or below, far less than the average of about $95 per barrel the Energy Department received for emergency sales from SPR in 2022.

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Bids for the solicitation are due on December 18, and the delivery will be received by the Big Hill storage facility. The department said it will continue to release monthly solicitations for any available capacity through at least May 2024.

The US Energy Department has already purchased nearly 9 million barrels for SPR replenishment for an average of about $75 a barrel, and secured nearly 4 million barrels in accelerated exchange returns, it said.

Crude oil market is also keenly watching for the release of US inflation data and the outcome of the US Federal Reserve meeting later this week.

Meanwhile, the data from the National Bureau of Statistics of China indicated worsening of disinflationary trend in that country. Consumer price index (CPI) of China fell 0.5 per cent month-on-month in November. China’s CPI had seen a decline of 0.1 per cent in October. Market was expecting a decline of 0.1 per cent in November.

Even producer price index (PPI) inflation also fell 3 per cent in November as against 2.6 per cent in October. Market was expecting a decline of 2.8 per cent in November. With this China’s PPI inflation remained in contraction for 14 consecutive months.

China is a major consumer of crude oil in the world market, and China’s economic recovery plays a significant role in boosting the prices of the commodity.

December natural gas futures were trading at ₹204.40 on MCX in the initial trading hour of Monday morning against the previous close of ₹217.20, down by 5.89 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), December jeera contracts were trading at ₹37,700 in the initial trading hour of Monday morning against the previous close of ₹36860, up by 2.28 per cent.

December dhaniya futures were trading at ₹7,358 on NCDEX in the initial trading hour of Monday morning against the previous close of ₹7,234, up by 1.71 per cent.