Oil prices fell about 2% during trading on Monday, amid the market’s anticipation of the liberation of the strategic oil reserves announced by the member states of the International Energy Agency, with the continued closures in China due to the Corona virus.
Oil prices ended their trading on Friday with a rise of more than 2%, but recorded weekly losses, by 1.5% and 1.2% for Brent crude and West Texas crude, respectively.
Oil Prices Today
Brent crude futures prices – for delivery in June 2022 – decreased by 2.22%, recording $100.04 a barrel.
The prices of futures contracts for West Texas Intermediate crude – for delivery in May – also decreased by about 2.24%, to reach $ 95.51 a barrel.
The market is watching developments in China, where authorities kept Shanghai, a city of 26 million people, closed under a “zero tolerance” policy for Covid-19, as China is the world’s largest oil importer.
Concern about China’s growth was the main reason for the drop in oil prices today, said chief market analyst, Jeffrey Haley, as the Shanghai shutdown showed no signs of lifting, and Guangzhou looked to start mass virus testing.
“Concerns are now growing that if China’s Omicron wave spreads to other cities, its no-corona policy will see extended mass lockdowns negatively affecting both industrial production and domestic consumption,” he added.
Strategic Oil Reserves
IEA member states are set to release 60 million barrels over the next 6 months, with the US matching that amount as part of its release of 180 million barrels announced in March.
The moves are aimed at making up for the shortfall in Russian oil after Moscow came under heavy sanctions in the wake of its invasion of Ukraine.
“We expect SPR volumes to be around 273 million barrels in total and 1.3 million barrels per day over the next six months,” JPMorgan analysts said in a note.
They added that this issuance would go a long way in the short term towards offsetting one million barrels per day of Russian oil, but they expected the supply to remain unconnected permanently, Reuters reported.
However, it is not clear whether this will fully compensate for the shortfall in Russian oil as exports continue, with India tempted by deep cuts, which has increased imports.
President Joe Biden will meet virtually on Monday with Indian Prime Minister Narendra Modi, the White House said, as the United States made clear it did not want to see a small increase in Russian energy imports from India.
In the United States, energy companies last week added oil and natural gas rigs for the third week in a row as Washington seeks more production to help its allies dump Russian oil and gas.