On Tuesday, oil prices declined as the U.S. government announced plans to release more crude from its Strategic Petroleum Reserve (SPR).
The U.S. Department of Energy (DOE) stated that it would sell 26 million barrels of oil from the SPR, a move that some traders did not expect.
Brent crude oil, against which Nigerian oil is priced, fell by 0.81% to $85.91 per barrel, while U.S. crude oil shed 1.16% to $79.21 per barrel.
Energy traders were anticipating news about refilling the SPR, not tapping it for additional supplies. The decision to sell more crude from the SPR could push the reserve to its lowest level since 1983.
The DOE had considered canceling the fiscal year 2023 sale, but that would have required Congress to act to change the mandate.
Traders are closely monitoring Tuesday’s U.S. consumer price index (CPI) data for January to gain insights into the inflation rate. Higher-than-expected data may cause a renewed sell-off in risk assets, including oil.
Meanwhile, supply concerns have eased after the Energy Information Administration projected record March production from the seven biggest U.S. shale basins. In addition, crude exports have resumed at a key Turkish port after a devastating earthquake rocked the region.
Oil is on the defensive, and the situation could worsen if inflation proves to be harder to tame. While some traders did not expect the release of more crude from the SPR, the decision could have a significant impact on oil prices in the coming days.
As always, the market remains volatile and unpredictable, and traders must be vigilant and responsive to changes in market conditions.