After the Biden administration announced that it plans to replenish strategic reserves after completing maintenance work this year, oil turned its route to a climb at midday, extending its rise to the fourth day.
US crude rebounded after falling as much as 2.5 percent at the start of the session, gaining to settle above $73 a barrel. Trade started lower Tuesday on news that China’s overall export growth slowed in April and imports fell sharply, eroding market confidence in demand. The US decision to cancel the previously mandatory sale of about 140 million barrels and start purchasing crude oil later this year to refill the strategic cache has halted the decline.
“The price is right for the US to start replenishing its strategic oil reserves, and it provides a much-needed bid for oil bulls as recessionary winds grow,” said Daniel Ghali, commodity strategist at TD Securities.
Investors are watching closely for news of when the US will replenish reserves, which are at their lowest level in four decades. The administration has previously said it plans to restock the cache when oil prices drop to around $70.
Oil is down nearly 10 percent this year as concerns over the Fed’s monetary tightening and the potential for a US recession outweigh a resilient physical market. Bank of America Corp. On Tuesday, Brent cut its crude oil forecast amid a weaker outlook for global demand. Still, the United Arab Emirates, a key OPEC member, downplayed the need for deeper production cuts after the restrictions began this month.