Oil held a two-day decline as concerns over physical demand and the possible restart of some flows from Iraq offset a plan by the US that it could start refilling the Strategic Petroleum Reserve after June.
(Bloomberg) — Oil held a two-day decline as concerns over physical demand and the possible restart of some flows from Iraq offset a plan by the US that it could start refilling the Strategic Petroleum Reserve after June.
West Texas Intermediate fell below $71 a barrel, after dropping by nearly 4% over the previous two sessions. The physical market is showing signs of weakness amid poor refining margins and lackluster buying in some areas. That comes as the two biggest economies showed further evidence of cooling this week, with US jobless claims rising and China’s recovery waning.
In the Middle East, Iraq said it’s resuming oil exports through the port of Ceyhan in Turkey on Saturday, according to the country’s oil minister. Should flows resume, that would return about 450,000 barrels a day to the market.
Crude has retreated by about 15% over the past month as the US economy moved closer to recession and China’s rebound continued to disappoint, threatening energy demand. That’s outweighed the lift from supply cuts announced by the Organization of Petroleum Exporting Countries and its allies.
“Prices may hit a floor soon, with low prices providing an entry point for many market players to put on new long positions,” said John Driscoll, director of JTD Energy Services Pte. Many people are waiting for a dip-buying opportunity given that a modest recovery is likely in the second half, he said.
Reflecting the weakness, timespreads have also come off in recent sessions. The prompt spread for WTI — the gap between the two nearest contracts — flipped into contango on Thursday, when longer-dated contracts trade at premiums to nearer ones, for the first time in about three weeks.
On Thursday, Energy Secretary Jennifer Granholm told lawmakers the US hopes to start refilling the nation’s strategic reserves after a congressionally-mandated drawdown ends next month. Earlier this week, the administration said it planned to begin purchasing oil for the SPR after finishing maintenance.
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