Oil Prices Dip Slightly as IEA, US Decide to Release More Stock

Oil prices settled 2% higher at the close of trading on Friday, but eased for a second consecutive week after member nations of the International Energy Agency and the US announced plans to release more crude from their strategic stockpiles.

Stockpiles of crude oil in the Middle East. Credit: Middle East Monitor

Oil prices settled 2% higher at the close of trading on Friday, but eased for a second consecutive week after member nations of the International Energy Agency and the US announced plans to release more crude from their strategic stockpiles.

Brent, the global benchmark for two-thirds of the world’s oil, settled 1.5% lower for the week at $102.78 a barrel at the close of trading on Friday. The price of Brent dropped to $99.92 per barrel in early trading on Friday, the first time it moved lower into double-digits since mid-March, but pared losses. The benchmarks have experienced their most volatile period since June 2020 in the past several weeks because of Russia’s military offensive in Ukraine.

The conflict has caused crude prices to soar, with Brent rising to a notch under $140 per barrel in March. It is still up 32% since the beginning of this year. Russia is the world’s second largest energy exporter behind Saudi Arabia, according to the IEA. About 20% of Russia’s oil exports go to China, the IEA figures show. The market is closely watching China, as the world’s largest importer of oil grapples with a new wave of Covid-19 infections that has stoked concerns about waning consumption.

Ed Moya, senior market analyst at Oanda, commented: “Crude prices have stabilised as the announcement of the co-ordinated stockpile release and China’s demand destruction driven sell-off has run its course. Rising rig counts, however, are being met with labour shortages and that will delay some crude production increases in the US. The oil market is still tight, but if China’s lockdowns have no end in sight, crude prices could still weaken by another 3 to 5 per cent.”

The IEA’s stockpile release, announced on Thursday, includes 120 million barrels of oil, half from the US and half from other members. This is in addition to the US releasing 120 million barrels from its Strategic Petroleum Reserve, which brings the total to 240 million barrels worldwide. The commitment is the largest from the 31 member nations in the agency’s 47-year history.

Global energy spending is set to reach a record $2.1 trillion in 2022, led by oil and gas as well as rising power prices and the EU reducing its reliance on Russian imports, Oslo-based consultancy Rystad Energy reported.

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