MELBOURNE (Reuters) – Oil prices slipped in early trading on Wednesday amid a push by U.S. President Joe Biden to lower fuel costs, including pressure on big U.S. companies to help ease the pain drivers during the nation’s peak summer demand.
U.S. West Texas Intermediate (WTI) crude futures fell $1.34, or 1.2%, to $108.18 a barrel at 0031 GMT, while Brent crude futures fell $1.33, or 1.2%, to $113.32 a barrel.
As the United States struggles to combat soaring gasoline prices and inflation, US President Joe Biden is expected to seek the temporary suspension of the 18.4 cents per gallon federal tax on gasoline on Wednesday, A source briefed on the plan told Reuters. Biden had revealed on Monday that he was considering calling for a tax break.
“Even oil traders recognized that higher oil prices, therefore higher gasoline prices, would lead to a more aggressive team attack from the (US) Fed pushing rates higher and the Biden administration becoming increasingly creative on the policy and fiscal front to rein in energy inflation is a beast,” said Stephen Innes, managing partner at SPI Asset Management.
Seven oil companies are due to meet Biden on Thursday, under pressure from the White House to lower fuel prices as they make record profits.
However, Chevron Chief Executive Michael Wirth said Tuesday that criticizing the oil industry was not the way to lower fuel prices.
“These actions are not beneficial to addressing the challenges we face,” Wirth said in a letter to Biden, which sparked a response from Biden saying the industry was being too sensitive.
Despite inflation concerns, demand is still on track to recover to pre-COVID levels and supply is expected to lag demand growth, which will keep the market tight, as the reported trading giant Vitol and Exxon Mobil Corp this week.
European oil sanctions against Russia for its invasion of Ukraine – which Moscow calls a “special operation” – have yet to take effect, meaning supplies will only get tighter.
“The market is still coming to terms with the growing disruption to Russian oil. European sanctions have not yet come into effect,” ANZ Research analysts said in a note, pointing to data showing that so far , there was only a relatively limited decline in Russian oil. Europe’s fuel supply since the start of the conflict.