OIL FALLS ON US STRATEGIC MOVE
OIL PRICES plunged yesterday on news that the US was considering the largest ever release from its Strategic Petroleum Reserve, while Opec+ stuck to its existing deal for May output.
Brent crude futures for May were down $5.91, or about 5.21 percent, to $107.54 (about R1 557.70) a barrel in afternoon trade.
The most actively traded June futures were down $5.53 at $105.91 a barrel, after falling by $7.
US West Texas Intermediate futures for May delivery was down $6.06, or 5.62 percent, to $101.76 a barrel, off a low of $100.16.
The record US SPR oil release of 180 million barrels was the equivalent to two days of global demand and would hit the market over several months, four US sources said on Wednesday, as the White House tried to lower fuel prices.
“Desperate times, clearly call for desperate measures and clearly the Biden administration believes the spike in oil prices warrants this move to eat into the country’s emergency supplies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“A drip release of 1 million barrels of oil is on the cards for the next six months, a sign that there is not expected to be a quick resolution to the crisis in Ukraine, which has squeezed oil supplies.”
Goldman Sachs analysts said the move would help the oil market to rebalance in 2022 but was not a permanent fix.
“This would remain, however, a release of oil inventories, not a persistent source of supply for coming years. Such a release would therefore not resolve the structural supply deficit, years in the making.”
Meanwhile, the Opec+ agreed at a meeting yesterday to stick to its existing agreement and raise its May production target by 432 000 barrels per day. Meanwhile, International Energy Agency member countries are due to meet today to decide on a potential collective oil release.