Oil Steady Near Six-Week Low as China Works on Reserve Release

(Bloomberg) -- Oil steadied near a six-week low as China said that it’s carrying out work on a release of crude from strategic reserves.

West Texas Intermediate recouped earlier losses to trade above $78 a barrel. The move suggests that China and the U.S. -- the world’s two biggest oil consumers -- are willing to work together to keep a lid on energy costs. It follows a virtual summit between Presidents Xi Jinping and Joe Biden earlier this week in which energy supplies were discussed.

With the global economy gripped by rising levels of inflation, key oil consumers are trying to bring down prices. The International Energy Agency said this week that some of the current tightness in the market is starting to ease as global production picks up, and the volume of oil being transported at sea has risen sharply in recent weeks.

“It feels like the SPR release will happen soon,” said Giovanni Staunovo, commodity analyst at UBS Group AG. “It’s just a question of when it happens and how much crude they release.”

China tapped its national crude stockpiles earlier this year in an effort to bring domestic prices down, and it also made a private sale from the reserves. On Thursday, the reserve bureau’s spokeswoman said that more details on the volume and the date of sale would follow on its website in due course.

In the physical market, jitters over the nation’s crude demand are spreading as spot premiums of a key Russian grade favored by Chinese independent processors tumbled by more than a $1 a barrel due to the likelihood of another tax probe, according to traders. Earlier this week, the grade traded at the highest premium since January 2020.

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