Investing.com-- Oil prices rose sharply in Asian trade on Friday, extending a strong run of gains after the U.S. government outlined plans to begin refiling the country’s strategic oil reserve, while concerns over supply disruptions in the Middle East also lent support.
The Department of Energy (DOE) announced offers totaling 6 million barrels to be delivered between December this year and January 2024, as the Biden administration sought to begin refiling the heavily-drawn Strategic Petroleum Reserve (SPR).
The government had drawn about 200 million barrels from the SPR since early-2022, bringing the reserve to its lowest level in nearly 40 years in a bid to combat high gasoline prices following the onset of the Russia-Ukraine war.
The DOE said it will sign purchase contracts for the refill at $79 a barrel or less, and will also continue with solicitations for oil purchases until at least May 2024.
The move encouraged oil bulls, who had long balked at the government’s SPR releases on the grounds that it was an attempt to subdue crude prices. Steady crude purchases by the U.S. also pointed to tighter supplies, especially as recent inventory data showed a sustained decline in oil reserves, while fuel demand remained steady.
The refilling plans also came amid persistent concerns over a spillover in the Israel-Hamas war into a broader Middle Eastern conflict, which could severely dent crude supplies from the oil-rich region.
The U.S. government was reportedly planning more measures to enforce oil sanctions on Iran, further limiting crude exports from the Middle Eastern nation.
Fears of an escalation in the Israel-Hamas war had greatly boosted oil prices over the past two weeks, as traders positioned for even tighter markets after deep supply cuts by Saudi Arabia and Russia earlier this year.
Brent oil futures jumped 1% to a near three-week high of $93.30 a barrel, while West Texas Intermediate crude futures rose 1% to $89.23 a barrel by 20:29 ET (00:29 GMT).
Oil heads for second week of gains
Brent and WTI futures were both set to add between 1.7% and 2.5% for the week, their second straight week in positive territory.
News of the SPR refill helped markets largely looked past U.S. sanctions relief on Venezuela’s oil sector, after the Latin American nation agreed to its first Presidential election in nearly six years.
Oil markets also took some support from weakness in the dollar, after recent comments by Federal Reserve Chair Jerome Powell were seen as somewhat dovish. Powell still left the door open for at least one more interest rate hike, but said that a recent spike in bond yields had contributed significantly to tightening financial conditions.
He also said that the U.S. economy remained resilient, spurring bets that fuel consumption in the country will remain strong.