Oil prices hit four-month lows; U.S. buys another 3M barrels for strategic reserve

Crude oil futures slid Monday to their lowest levels since early February as traders assessed OPEC+’s decision to extend the cartel’s cuts into 2025 while beginning to unwind some additional voluntary reductions after this year’s Q3, earlier than expected.

Goldman Sachs analysts said the decision was bearish for oil, as the phasing out of voluntary cuts shows a strong desire by several OPEC+ members to restore production despite recent increases in global oil inventories.

“The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations,” Goldman said.

Signs of weakening demand growth also have weighed on oil prices recently, and the U.S. Energy Information Administration will release estimates of oil stocks and fuel demand on Wednesday, which will show how much gasoline was consumed around the Memorial Day weekend, the start to the U.S. driving season.

Believing the market looks well supplied, Again Capital’s John Kilduff tells Reuters, it is “game over” for crude prices “if we do not get a spectacular number on Memorial Day.”

U.S. July front-month gasoline future (XB1:COM) finished -3.4% to $2.3356/gal, its lowest settlement in more than three months.

Front-month Nymex crude (CL1:COM) for July delivery ended -3.6% to $74.22/bbl, its fourth straight daily loss and largest one day percentage decline since January 8, and front-month August Brent crude (CO1:COM) closed -3.4% to $78.36/bbl, also a fourth consecutive loss and sharpest one-day percentage decline since December 12.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UGA)

The U.S. is buying another 3M barrels of oil to the Strategic Petroleum Reserve at an average price of $77.69/bbl, the Department of Energy said Monday.

The Biden administration said the additions were part of an ongoing series of purchases to restore SPR levels while U.S. crude prices remain below $80/bbl.

The DoE said the reserve held 370.2M barrels – 143.8M barrels of sweet crude and 226.4M barrels of sour crude – as of Friday, still the lowest amount of crude in the SPR since November 1983.