On Tuesday, oil prices fell after the U.S. government said it would free more crude from its Strategic Petroleum Reserve (SPR) as mandated by lawmakers, eluding expectations from some traders that the liberation could be canceled or delayed.
Brent crude futures plummeted by 70 cents, or 0.81%, to $85.91 per barrel by 02:56 GMT, while U.S. crude futures dropped by 93 cents, or 1.16%, to $79.21 per barrel.
After the previous session ended, the US Department of Energy (DOE) announced that it will sell 26 million barrels of oil out of SPR, bringing the reserve down to its lowest level since 1983.
Edward Moya, an analyst at OANDA said that “Energy traders were expecting to hear news about refilling the SPR and not tapping them for more supplies.”
After US President Joe Biden’s administration sold a record 180 million barrels from the deposit last year, the DOE considered removing the sale for the financial year 2023. However, changing the mandate would have compelled Congress to act.
Traders will be seeking clues from Tuesday’s crucial U.S. consumer price index (CPI) information for January. U.S. monthly consumer prices soared in the prior two months instead of falling as previously predicted, risking higher inflation readings in the months ahead.
“Any higher-than-expected data may cause a renewed sell-off in risk assets, including oil,” an analyst at CMC Markets, Tina Teng said.
Supply concerns also eased after the Energy Information Administration said it anticipated record March production from the seven biggest U.S. shale basins. Elsewhere, crude exports recommenced at a vital Turkish port after a devastating earthquake rocked the region.
“Oil is on the defensive and it could get uglier if inflation proves to be harder to tame,” OANDA’s Moya said.