Brent crude slid below $100 for the first time since March 16 amid plans to release huge amounts of petroleum and oil products from strategic storage, and also China’s prolonged coronavirus closure.
Crude oil was down $4.1, or 3.99 per cent, at $98.68 per barrel. The price of US West Texas Intermediate (WTI) crude fell $4.28 a barrel, or 4.28 per cent, to $94.07 per barrel.
The International Energy Agency (IEA) recently announced that member countries will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180-million-barrel release announced in March.
The actions are meant to make up for a shortfall of Russian crude after Moscow was extensively sanctioned for what it claims was a “special military operation” in Ukraine.
As per JP Morgan analysts, the release of Strategic Petroleum Reserve (SPR) volumes will amount to 1.3 million barrels per day (BPD) over the next six months, enough to cover a 1 million BPD shortfall in Russian oil supplies.
The release of strategic government oil reserves is projected to relieve some market tightness in the coming months, reducing the likelihood of oil prices rising and re-enforcing near-term supply constraints.
While this is the largest release since the IEA stockpile was established in 1980, market participants believe it will fail to affect the principles of the oil market and will just delay further increases in production from crucial suppliers.
