Biden administration to restart acquisitions for Strategic Petroleum Reserve

Oil prices took a slight dip in futures trading on Tuesday after Russian Deputy Prime Minister Alexander Novak suggested that OPEC+ may increase production if market conditions require it, alleviating concerns about supply shortages. Novak stated, "It all depends on the current situation, the balance of supply and demand... We need to assess how the market is reacting." OPEC+ was anticipated to extend voluntary production cuts of 2.2 million barrels per day into the second quarter, with a decision on production levels scheduled for a June 1 meeting. Carsten Fritsch of Commerzbank pointed out potential challenges for OPEC, such as Iraq and Kazakhstan not fully complying with agreed production cuts in the first quarter. However, both countries have plans to make up for overproduction by the end of the year.

The U.S. Energy Information Administration adjusted its world oil and liquid fuels production forecast upwards for this year while lowering demand expectations, citing a well-supplied market.

Despite tensions in the Middle East, the report noted minimal price volatility due to significant spare crude production capacity. Nymex crude for June delivery closed down 0.1% at $78.38/bbl, while July Brent crude closed down 0.2% at $83.16/bbl.

The Biden administration is seeking to replenish the Strategic Petroleum Reserve with up to 3.3 million barrels for delivery in October, as oil prices fall below the $79/bbl replenishment cap. Stockpiles in the Strategic Petroleum Reserve have increased for six consecutive months as the Department of Energy works to refill the reserve, purchasing 32.3 million barrels of oil at an average price of $76.98/bbl and accelerating nearly 4 million barrels of exchange returns.