NEW YORK: Oil futures fell sharply yesterday after large consuming countries said they would release oil from reserves to counter tightening supply and hawkish minutes from the US central bank that bolstered the dollar.
Selling accelerated into the close, leaving both Brent and West Texas Intermediate benchmarks at their lowest closing levels since March 16. Brent crude futures settled down US$5.57, or 5.2%, at US$101.07 (RM426) a barrel, while US crude fell US$5.73, or 5.6%, to US$96.23 (RM405.60) a barrel.
Crude markets have been through weeks of volatility, with prices surging on supply concerns after Russia’s invasion of Ukraine and subsequent sanctions on Moscow by the United States and its allies.
Lately the market has been pulling back following reserve releases along with worries of slowing demand in China, where a resurgent pandemic has prompted lockdowns of cities including Shanghai. Chinese refiners of late are avoiding new contracts with Russia, suggesting Beijing is being cautious not to overtly support Moscow at this time.
“This market mostly appears to be reacting around the Fed comments and the EIA storage report,” said Gary Cunningham, director of market research at Tradition Energy. The Fed has “given some strength to the dollar and that’s being reflected in lower oil prices”.
US crude stocks rose by 2.4 million barrels in the latest week, the US Energy Information Administration said, while analysts had expected a drawdown. Output also rose, hitting 11.8 million barrels a day, the most since late 2021, and output is expected to continue rising. The United States also released nearly 4 million barrels from its strategic reserve in the week.
“The SPR release was huge which does raise confidence that they can move a lot out of the reserve on a weekly basis,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. – Reuters