Oil edged higher as a US plan to refill emergency crude reserves offset the drag from a stronger dollar and an industry report that pointed to a hefty increase in American commercial stockpiles.
West Texas Intermediate traded above $87 a barrel in Asia after a volatile session on Tuesday, when prices were buffeted by the storage plan and data showing inflation is still rampant. The US may start restocking the emergency reserve when crude dips below $80, people familiar with the matter said.
Oil hit the lowest level since January earlier this month as traders attempted to price in a possible global slowdown, tighter monetary policy, and lower energy demand.
The hotter-than-expected US inflation figures have set the scene for another round of aggressive rate hikes from the Federal Reserve as well as further gains in the dollar, which is already near a record.
The industry-funded American Petroleum Institute reported US commercial crude stockpiles expanded by 6 million barrels last week, according to people familiar with the figures.
Government data due Wednesday will provide greater clarity. The holdings jumped by 8.8 million barrels in the previous period.
US strategic reserves have plunged this year, hitting the lowest in almost 40 years, after President Joe Biden ordered the release of 180 million barrels to counter the inflationary fallout spurred by Russia’s invasion of Ukraine.
Still, there have been mixed signals of late on the next step, with officials also weighing an additional sale given that curbs on Russian oil are set to tighten.
Widely-watched time spreads have been volatile. Brent’s prompt spread -- the difference between its two nearest contracts -- was 98 cents a barrel in backwardation.
That compares with 79 cents a week ago, but the figure was above $2 as recently as last month.
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