Oil Drops Below $70 as Sentiment Fades, US Sees Slow SPR Refill

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(Bloomberg) — Oil halted its recent advance as weakening sentiment weighed on broader markets and the US government signaled that refilling the Strategic Petroleum Reserve will take longer than previously expected.

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Restocking the oil reserve this year at the administration’s target price of $70 a barrel will be “difficult,” US Energy Secretary Jennifer Granholm said Thursday. Oil prices also tracked equities, which faded throughout the afternoon. 

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Last week’s banking crisis broke crude out of the $10 trading range that it had been stuck in for about three months. The commodity has since recouped some of those losses, gaining for three straight sessions to start this week. For its next leg, oil may take cues from US markets and China’s economic rebound from Covid Zero measures.

Read More: Oil Reserve Refill is ‘Difficult’ This Year, Energy Chief Says

In a bearish price signal, Brent’s nearby put skew — a metric that tracks the willingness of traders to pay for contracts that profit from a price decline — is hovering near levels last seen in mid-August. Meanwhile, the pace of China’s recovery has been slower than expected.

“Traffic is up, we’re seeing transit up, but it’s not all the way back to pre-pandemic levels — that’s taking time to build,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “If you think back to US reopening, we reopened and there was a flood of activity, and then everyone pulled back because of infections and concerns.”

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