(CNN Business)The price of oil has shot up this fall, boosting profits for major producers but hurting the wallets of drivers who need to fill up their tanks. Just a few days back, gas prices in California hit their highest level ever. This week, however, some of the pressure has started to lift.
What’s happening: West Texas Intermediate futures, the US benchmark for oil prices, and Brent futures, the global benchmark, are now trading at their lowest levels in six weeks on signals that supply constraints could begin to ease soon.
In the United States, prices fell sharply Wednesday after oil inventories at a key hub in Cushing, Oklahoma rose for the first time in weeks.
But Bjornar Tonhaugen, head of oil markets at the consultancy Rystad Energy, told me that the biggest factor driving prices right now is the expected release of strategic reserves from the United States and China.
According to the White House, US President Joe Biden and Chinese President Xi Jinping discussed the “importance of taking measures to address global energy supplies” during their virtual summit this week. That sparked chatter about a coordinated move initiated by the White House to put millions of barrels of oil on the market.
Thursday brought some signs that China is taking action. Reuters reported that the country’s state reserve bureau said it was working on a release, though the exact details remain murky.
Based on current price moves, Tonhaugen said, investors are expecting between 20 million and 30 million barrels to come online in the next month. That could be from the United States and China together, or through broader action coordinated by the International Energy Agency.
He emphasized, however, that the release of strategic reserves won’t change the overall picture for long.
“[Releasing] strategic reserves is not the same as getting more continuous production of oil online,” Tonhaugen said.
But more lasting relief could be coming. The IEA said in a report this week that it expects global oil supplies to rise by 1.5 million barrels per day over November and December as some production in the United States picks up again.
“The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon,” the Paris-based agency said.
OPEC is also steadily ramping up output, but there are questions about whether supply gains will be enough to meet a surge in demand for fuel.
President Joe Biden, who is taking political heat from the spike in gasoline prices, asked the Federal Trade Commission on Wednesday to “immediately” investigate whether illegal activity by oil and gas companies is contributing to the problem.
The American Petroleum Institute slammed the push and renewed its call for the federal government to encourage domestic oil and gas production even as it tries to fight the climate crisis.
“This is a distraction from the fundamental shift that is taking place and the ill-advised government decisions that are exacerbating this challenging situation,” the group said in a statement.