Oil prices down 5 sessions in a row, at their lowest in nearly a year

But a drop below $72 a barrel for U.S. benchmark oil prices raises the likelihood that the Biden administration will buy crude to replenish the nation’s oil reserve.

Price action

• West Texas Intermediate crude for January delivery
  CL00,
  +0.79%
   
  CL.1,
  +0.79%
   
  CLF23,
  +0.79%
  fell 55 cents, or 0.8%, to settle at $71.46 a barrel on the New York Mercantile Exchange. Prices saw lowest finish for front-month contract since Dec. 21, 2021, according to Dow Jones Market Data.

• February Brent crude
  BRN00,
  +0.95%
   
  BRNG23,
  +0.95%,
  the global benchmark, declined by $1.02, or 1.3%, to $76.15 a barrel on ICE Futures Europe, settling at the lowest since Dec. 24 of last year.

• Back on Nymex, January gasoline
  RBF23,
  +0.18%
  shed nearly 1.4% to $2.0491 a gallon, while January heating oil
  HOF23,
  +0.68%
  settled at $2.8798 a gallon, up 3.6%.

• January natural gas ended at $5.962 per million British thermal units, up 4.2%, following a gain of 4.6% in the previous session.

Market drivers

Traders have become more focused on oil demand expectations, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch on Thursday, following the decision Sunday by major oil producers, known as OPEC+, to leave oil production targets unchanged, continuing on with output cuts that began in November.

Also see: Why coal leads the rise in commodities this year

Data from the Energy Information Administration on Wednesday showed a fourth-consecutive weekly decline in U.S. crude inventories, down 5.2 million barrels for the week ending Dec. 2.

However, the EIA also reported weekly inventory gains of 5.3 million barrels for gasoline and 6.2 million barrels for distillates.

The report “pointed to some further deterioration in consumer demand as we approach the end of the year,” Richey wrote in Thursday’s newsletter.

Over the past four weeks, motor gasoline supplied, which is a proxy for demand, fell by 7.1% from the same period last year to 8.4 million barrels per day, the EIA reported. That’s the lowest level since late January, according to Sevens Report Research. That suggests a “potential new drop off in consumer demand as broader inflation pressures grip personal balance sheets,” Richey wrote.

News flow over the last week, meanwhile, has been “decidedly bearish as hot economic data and hawkish [Federal Reserve] policy chatter have weighed on the broader outlook for the economy,” he wrote.

Supportive factors

Still, oil prices found some support on news that TC Energy Corp. stopped pumping oil from its 610,000-barrel-a-day Keystone pipeline after finding an oil leak.

“This is a major supply source to the Gulf Coast refinery complex and could support crude oil prices and refinery cracks until it is resolved,” said the energy team in Kansas City for StoneX, in a daily report, referring to the crack spread, which is the difference in price between refined products and crude oil.

Meanwhile, WTI oil prices fell into the band of prices the Biden administration had previously said may trigger repurchases of crude oil for the nation’s Strategic Petroleum Reserve.

The Biden administration’s “commitment to buy oil in the low $70s to replenish the SPR is offering a fundamental ‘Biden put’ of softs in the market here,” said Richey.

In October, President Joe Biden said the administration intends to buy oil to refill the reserve when prices are at or below about $67 to $72.

In other news, the EIA reported Thursday that domestic natural-gas supplies fell by 21 billion cubic feet for the week ended Dec. 2. That compared with an average analyst forecast for a decline of 26 billion cubic feet, according to a survey conducted by S&P Global Commodity Insights.