© Reuters. FILE PHOTO: A worker holds a nozzle to pump gasoline into a vehicle at a gas station in Mumbai, India May 21, 2018. REUTERS/Francis Mascarenhas/File Photo
By Sudarshan Varadhan
(Reuters) – Oil prices fell on Tuesday after the U.S. government said it would release more crude from its Strategic Petroleum Reserve (SPR) as requested by lawmakers, defying some traders’ expectations that the release could be canceled or delayed.
futures fell 70 cents, or 0.81%, to $85.91 a barrel at 0256 GMT, while futures fell 93 cents, or 1.16%, to $79.21 the barrel.
The US Department of Energy (DOE) said after the end of the previous session it would sell 26 million barrels of oil from the SPR, a release that would likely push the reserve to its lowest level since 1983.
“Energy traders were expecting to hear news about the filling of the SPR and not exploit it for more supply,” said Edward Moya, an analyst at OANDA.
The DOE had considered canceling the fiscal year 2023 sale after US President Joe Biden’s administration sold a record 180 million barrels of the reserve last year. But that would have required Congress to act to change the mandate.
Traders will be looking for clues from Tuesday’s crucial US Consumer Price Index (CPI) data for January. Monthly consumer prices in the United States have risen over the past two months instead of falling as previously estimated, increasing the risk of higher inflation in the months ahead.
“Any data higher than expected could lead to further selling of risky assets, including oil,” said CMC Markets analyst Tina Teng.
Supply worries also eased after the Energy Information Administration said it expected record March production from the seven largest U.S. shale basins. Elsewhere, crude exports have resumed at a key Turkish port after a devastating earthquake rocked the region.
“Oil is on the defensive and it could get worse if inflation proves harder to control,” OANDA’s Moya said.