By Barani Krishnan

Investing.com – Oil clawed back Thursday’s early losses and a chunk of the previous session’s slide on a report that the U.S. government was not planning to sell crude from its emergency reserves nor ban exports of the commodity to contain runaway fuel prices and inflation.

U.S. crude’s benchmark was up 85 cents, or 1.1%, at $78.28 per barrel by 1:55 PM ET (17:55 GMT).

The global standard for oil was London-traded crude. It rose 86cs or 1.1% to $81.94.

Both crude benchmarks fell about 3% earlier in the day, extending Wednesday’s 2% drop, as the trade worried about the impact of a crude sale from the Strategic Petroleum Reserve as well as the reimposition of a four-decade ban of U.S. oil exports lifted in 2015.

Concerns arose following Jennifer Granholm, Energy Secretary, citing the SPR sale of oil and the export ban as tools she had in the fight against an imminent supply-and-price crisis. Granholm addressed the industry at the Financial Times’ Wednesday event.

Bloomberg’s reporter who was following up on the FT article, tweeted mid-morning on Thursday, that the Department of Energy had not considered tapping into its SPR at this point, nor were they pursuing a ban of oil shipments. The Bloomberg tweet immediately prompted oil bulls to chase higher prices.

“Energy traders initially thought that perhaps the Biden administration was panicking and wanted to tap the SPR a lot sooner than warranted,” Ed Moya, an analyst at OANDA, said, referring to the back-and-forth on the SPR sale and export ban story. “The oil market is still heavily in deficit and that will likely be the story over the winter.”

The SPR, located near the U.S. Gulf of Mexico, is the world’s largest emergency stockpile of crude oil. Managed by the U.S Department of Energy, the reserve contained 617.8m barrels of oil last week — equal to about a month of US petroleum products demand.

In 2011, the Obama administration teamed up with members of the International Energy Agency to tap into emergency stocks in order to lower the soaring price. In order to increase revenue, the U.S. Congress authorized periodic SPR sales.

Since 2015 when Congress removed federal shipping restrictions, crude oil exports from the United States have been freed. The country sends anywhere from 2.0 to 3.0 million barrels daily to China and other countries.

The average price of petrol at U.S. pumps is hovering at $3.19 a gallon — the highest in seven years — with the White House fearing that the rise in fuel costs could damage the administration’s political prospects ahead of the midterm elections next year.

The global crude oil prices (represented by WTI/Brent) are up around 60% compared to the previous year.

On Wednesday, oil prices were also under pressure after another week of crude stockpile increases in the United States.

The weekly Petroleum Status Report by the Energy Information Administration stated that the number of barrels increased by 2.35million barrels during the week ending October 1. This follows the 4.58 million increase in September 24. 

Apart from reporting the crude build, the EIA increased its U.S. crude oil production estimates by 11.3 million barrels per daily for the week up to October 1. This is an increase of 11.1million daily previously. 

EIA stated that oil production rose by 3.26million barrels over the week ended October 1 compared to the expected build of 400,000 barrels. Stockpiles for motor fuel increased by 3.48million in the week before.

Inventories of  , which include diesel and , fell by 396,000 barrels in the latest week against an expected deficit of 750,000, data showed.