Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Oil sheds bulk of invasion-driven gains on SPR sales, virus, Fed

© BloombergThe silhouettes of pumpjacks are seen above oil wells in the Bakken Formation in North Dakota, U.S. Photographer: Bloomberg Creative Photos/Bloomberg
The silhouettes of pumpjacks are seen above oil wells in the Bakken Formation in North Dakota, U.S. Photographer: Bloomberg Creative Photos/Bloomberg

Oil headed for a back-to-back weekly retreat on plans for massive stockpile releases, a demand-sapping virus outbreak in top importer China and a hawkish turn from the US Federal Reserve.

West Texas Intermediate traded above $96 a barrel, with prices about 3% lower this week. The recent drop means the U.S. benchmark has now lost most of the gains seen since Russia’s invasion of Ukraine began in late February.

Alarmed by the surge in energy costs spurred by Moscow’s assault, Washington and allies have announced plans to sell almost a quarter-of-a-billion barrels from strategic petroleum reserves. With the move supported by France, the U.K. and others, that’s prompted a collapse in once-elevated time spreads.

Crude prices — which remain more than a quarter higher year-to-date — have also been hurt this month as China ordered a series of lockdowns in key urban centers including Shanghai to quell a coronavirus outbreak. At the same time, plans by the Fed for an aggressive tightening of U.S. monetary policy to combat inflation have blunted demand for risk assets and boosted the dollar.

“At some point, the sentiment-driven sell-off will give way and fundamentals will reassert themselves,” said Stephen Innes, managing partner at SPI Asset Management Pte, adding that deficits are likely to persist. More market participants will “start fretting about how will the U.S. administration replenish the SPR drawdown,” he said.

Prices

  • West Texas Intermediate for May delivery rose 0.3% to $96.27 a barrel on the New York Mercantile Exchange at 7:01 a.m. in London.
  • Brent for June settlement was 0.1% higher at $100.65 a barrel on the ICE Futures Europe exchange.

While many western companies are shunning Russian oil following the invasion, there are plenty of willing takers in Asia, especially in China and India. Cargoes of Russian Sokol crude from the Far East have sold out for next month.

Oil markets remain in backwardation – a bullish pattern marked by near-term prices above longer-dated ones – but differentials have collapsed. Brent’s prompt spread, the difference between its two nearest contracts, has plunged to 60 cents a barrel in backwardation from more than $3 two weeks ago.

China’s latest coronavirus outbreak shows no sign yet of abating, disurupting Asia’s largest economy. Cities including the commercial hub of Shanghai are facing severe restrictions, curbing mobility and energy consumption.

Recommended for you

More from Energy Voice

Latest Posts