Oil prices rebounded as US rebuying oil to replenish its Strategic Petroleum Reserves (SPR) boosted market sentiment about demand outlook and concerns eased about the containment of Covid-19 in China.
International benchmark Brent crude traded at $79.50 per barrel at 10.29 a.m. local time (0729 GMT) for a 0.58% increase from the closing price of $79.04 a barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $74.92 per barrel at the same time, a 0.61% gain after the previous session closed at $74.46 a barrel.
China recently relaxed its Covid restrictions and stopped mass testing and is only recording positive cases at hospitals and fever clinics where the patient has Covid symptoms.
Although the country reported its first Covid-related deaths in weeks on Monday, the current pause in the country’s strict measures is raising hopes for strengthening demand.
Meanwhile, strong demand hopes further increased after the US announced that it will begin repurchasing crude oil for its emergency reserves in February.
‘This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,’ the Energy Department said in a statement.
The decision will provide American crude oil producers the assurance to make immediate investments, as the oil price they receive when they sell to the SPR will be locked in place, it added.
This represents a shift from President Joe Biden’s move in March to release a total of 180 million barrels from the SPR to support the global oil market that faced serious oil supply disruptions due to Russia’s war on Ukraine.
‘This initial step to fulfilling the President’s replenishment strategy follows his historic release from the SPR to address the significant global supply disruption caused by (Russian President) Putin’s war on Ukraine and provide a wartime bridge for domestic production to increase. The releases have helped lower (gasoline) prices for American families,’ the statement said.
The Energy department informed that the buyback would commence in Feb. 23.
