Oil prices are slumping after a U.S. government report forecast oversupply next year, lowering expectations of an immediate emergency supply release.
West Texas Intermediate (WTI) crude oil dipped 0.4% after surging 2.7% in the previous trading session on hopes that the White House would authorize tapping into emergency oil stockpiles to ease high fuel prices on consumers.
However, the White House has chosen not to undertake an emergency oil reserve release, saying it continues to look at all the tools it has available to limit the impact of high prices on consumers.
That decision was influenced by a U.S. government forecast that showed the global oil market will return to a surplus as soon as the first quarter of next year, potentially cooling the current rally in energy prices.
Separately, the industry-funded American Petroleum Institute reported nationwide crude holdings fell by about 2.5 million barrels last week, although there was a rise at the key storage hub at Cushing, Oklahoma.
Oil prices surged to a seven-year high last month (October) as economies recovered from the pandemic and a global energy crisis aided demand, boosting U.S. gasoline prices and pushing inflation higher.
The surge prompted U.S. President Joe Biden to weigh the merits of an emergency crude release after the Organization of Petroleum Exporting Countries (OPEC) and its allies refused to increase output at a faster rate.
Tuesday’s report appears to have made that less likely in the short-term, with supply-demand balances looking weaker for next year (2022).
WTI for December delivery fell 0.4% to $83.78 U.S. a barrel in London trading. Brent crude oil for January settlement was unchanged at $84.78 U.S.
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