Oil Falls over OPEC+ Output Plan, U.S Crude Reserve Release
Crude oil prices edged down early Friday as the market priced in the Organisation of Petroleum Exporting Countries (OPEC) 432,000-barrel-per-day production increase, an increase from 400,000 b/d increase previously planned.
Consequently, trading data shows that prices of Brent, West Texas Instrument future slope downward at the weekend, the pattern which has persisted since the beginning of the week following the peace talk between Russia and Ukraine.
International benchmark Brent crude was trading at $103.45 per barrel, dropped by 1.20% after closing the previous session at $104.71 a barrel.
American benchmark West Texas Intermediate (WTI) was at $98.94 per barrel at the same time for a 1.33% loss after the previous session closed at $100.28 a barrel.
Keeping the pressures in the crude market in check, United States President Joe Biden’s administration also confirmed that it will release 1 million barrels per day from the US strategic petroleum reserve in the next 180 days.
The crude oil market had already priced in prior to the confirmation, OANDA analyst Jeffrey Halley said in a Friday note.
In Asia, softer PMI data across the region has sparked growth worries, which weakened sentiment as well. The US oil reserve release is expected to be enough to cap oil prices, unless the situation in Ukraine deteriorates significantly, according to Halley.
The OPEC+ hikes and the strategic reserve release are balanced out by ongoing geopolitical tensions, Halley said. Further, if Venezuelan and Iranian oil is allowed to reenter the international market, it appears market participants may have seen the highs in oil, Halley noted.
US Strategic Oil Reserve Release
Another possible coordinated release of emergency oil reserves, this time from the member countries of the International Energy Agency, will build on further-announced strategic reserve releases from the US and ease the acute supply shortage in the oil market, Commerzbank said in a Friday note.
IEA members are meeting today to discuss this coordinated release. Based on the agency’s estimates of oil supply and demand, the coming quarters will no longer show any supply deficit even with the removal of roughly 30% of the Russian oil supply, the bank noted.
US President Joe Biden also called on the US oil industry to boost production further, with the threat of fines if oil and gas leases and wells on public land remain unused. This represents a full reversal in energy policy, Commerzbank said, as Biden had planned to prohibit drilling permits on federally owned land.
The bank said Biden’s decision to release an unprecedented volume of reserves could be attributed to the behaviour of OPEC and allied producers, which agreed Thursday to boost oil output by 430,000 barrels per day.
However, OPEC+ has opted not to use the increased reference levels for its five largest producers coming into force in May, which would have allowed production to be raised by another 1.6 million bpd, Commerzbank noted.
European Natural Gas Prices Extend Gains
European natural gas prices extended gains as Russia moved forward with its plan to ask for gas payments in rubles, effective April 1, with buyers to open special ruble currency accounts with Gazprom, Australia’s ANZ Bank said in a Friday note.
While some countries have activated contingency plans that include supply rationing, buyers are awaiting more clarity on which contracts will be affected, the bank noted.
North Asian liquefied natural gas futures also increased as issues in Europe weighed on sentiment, according to ANZ Bank. However, Japan “does not intend to withdraw” from oil and LNG development projects in Russia on concerns about energy security, trade minister Koichi Hagiuda said Friday, according to a Nikkei Asia report. #Oil Falls over OPEC+ Output Plan, U.S Crude Reserve Release
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