Oil prices have been shocked by news of the Biden administration’s plans to start buying oil to replenish the Strategic Petroleum Reserve.
On Friday, the US Department of Energy said it would start buying oil to support the Strategic Petroleum Reserve, the first purchase since this year’s record release of 180 million barrels from storage.
The US government will begin replenishing the world’s largest emergency oil supply after it has been depleted for months, saying it is taking steps to improve the country’s energy security and is giving domestic crude oil producers “guarantees” to drill more wells.
A senior official told reporters that the ministry would buy up to 3 million barrels for delivery in February.
The decision to buy oil again to replenish the Strategic Petroleum Reserve follows the fall in oil prices in recent weeks. This is a reflection of the Joe Biden administration, which sold off reserves to drive down fuel costs and ease fears of a global energy shortage caused by Russia’s war in Ukraine.
The Strategic Petroleum Reserve held just over 382 million barrels last week, the lowest level since the mid-1980s, according to the US Energy Information Administration.
Parallel to the plans of the Biden administration, oil prices recorded losses. WTI traded around $75 a barrel after falling to $73 earlier.
Brent futures closed down $2.17, or 2.67%, at $79.04 a barrel. U.S. oil futures fell $1.82, or 2.39%, to $74.29 a barrel.
Markets are still under pressure from fears that the determination of central banks to continue fighting inflation will push the economy into recession.
Oil endured a tough end of the year as sluggish markets and limited supply disruptions from Russia weighed on prices. Although the outlook has improved in recent days as U.S. inflation figures have slowed and China appears poised to reopen its economy, central banks have taken a hawkish tone on key interest rate decisions this week.