(Bloomberg) -- Oil settled close to a one-week high as news of a US plan to refill emergency crude reserves largely offset broader inflation concerns.

President Joe Biden’s administration is considering restocking the Strategic Petroleum Reserve when crude falls below $80 a barrel, Bloomberg News reported on Tuesday. The news revived West Texas Intermediate futures that had earlier dipped as low as $85 on bearish inflation data.

The White House has been releasing emergency reserves in recent months to plug supply gaps as war and geopolitical turmoil around the world disrupted traditional sources of crude.

“It may not be a catalyst for $100 crude but does offer a buffer to the downside risk that the market is worrying about,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.

Earlier on Tuesday, prices fell alongside equities after the release of worse-than-expected inflation figures for August.

Crude prices earlier this month dropped to the lowest since January with the US dollar rallying to record highs as central banks prepared for more interest-rate hikes. Fundamental headwinds remain as Saudi Arabia told OPEC it raised crude production above 11 million barrels a day for the first time in more than two years, while investors are fretting about global consumption as top importer China battles virus outbreaks.

“We do not expect a sustained rally soon, but estimate the risk/reward outlook has improved again,” Morgan Stanley analysts including Martijn Rats and Amy Sergeant said in a note. “The oil market’s structural outlook remains one of tightness, but for now, this is offset by cyclical demand headwinds.”

Some leading banks have been scaling back oil-price expectations. Morgan Stanley reduced its Brent price forecasts for this quarter and next, according to a note, following a similar move by UBS Group AG earlier this week. JPMorgan Chase & Co., however, reiterated its call for $150 crude on Bloomberg TV, noting that China’s demand will revive once pandemic-related lockdowns are lifted, while international explorers aren’t investing enough to replace reserves.

Separately, US Secretary of State Antony Blinken said it was “unlikely” the US and Iran would reach a new nuclear deal anytime soon, echoing recent comments from France, Germany and the UK, and pushing back the likelihood of any substantial increase in Iranian oil shipments in the near term.

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Author: Julia Fanzeres and Ilena Peng