(Bloomberg) -- Oil eked out a gain on Monday as Saudi Arabia is raising prices, but the rally cooled after the U.S. signaled measures to ease oil and gasoline prices.
Futures in New York closed 0.8% higher, paring gains of as much as 1.7% earlier in the session. U.S. Energy Secretary Jennifer Granholm said that President Biden may make an announcement to address high oil and gasoline prices this week. Granholm didn’t specify any particular measures, but the U.S. has said that releasing crude from the Strategic Petroleum Reserve is one option it’s considering to cool prices.
Still, prices were supported by the biggest increases to some of Saudi Arabia’s official selling prices in decades at the end of last week. Asian buyers will probably take their full contractual volumes of oil next month, despite the higher costs, signaling a strong market.
The markets traded sideways throughout most of the afternoon, waiting to see if the U.S. would release crude from the strategic reserves and if so, how much. Only a coordinated effort from the U.S. with other consumer countries could substantially bring prices down, said John Kilduff, founding partner at Again Capital LLC
“They got to go pretty big because they want to try to make an impact,” said Kilduff. “If they can do that, then you’ll see a reprise of a sell-off we saw last week; but if it falls short it will be a buying opportunity.”
Oil prices have soared this year to the highest since 2014, fanning inflation and lifting product prices, as the roll-out of vaccines boosted mobility and stoked energy demand.
High energy prices led Biden and other consumer countries to lobby the Organization of Petroleum Exporting Countries and its allies to step up the pace of their supply output. Despite foreign pressures, the alliance chose to stick with a planned, modest hike of 400,000 barrels a day, keeping oil in the $80 range and raising the possibility of an SPR release. The Biden Administration will be scrutinizing a monthly U.S. report published on Tuesday, according to Granholm.
Meanwhile, US crude stocks in the strategic petroleum reserve fell by 3.14 million barrels last week, the biggest weekly drop since July 2017, data from the Department of Energy show, ahead of weekly figures due on Wednesday. The release of figures comes as investors speculate that Biden will tap into emergency reserves to quell rising prices.
In Washington, the U.S. House of Representatives passed the $550 billion infrastructure bill, allocating billions for repairs of roads, bridges, and other major projects. Analysts see the bill as providing another upside for oil on the horizon.
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