Economy

Oil prices fall sharply

Oil prices fall sharply
Written by on100dayloans

Oil prices fell sharply on Thursday, after reports that the United States plans to draw one million barrels a day from its strategic reserves. The decision should thus relieve the black gold supply crisis.

Shortly after 7:30 a.m., a barrel of Brent from the North Sea, for delivery in May, tumbled 5.31% to 107.43 dollars below the 110 dollar mark. The previous evening, it was trading up more than 2% at $113.45, after having come close to $115 earlier in the day ($114.80).

As for the barrel of West Texas Intermediate (WTI), also maturing in May, it fell even more sharply, yielding 6.3% to 101.30 dollars, approaching the 100 dollar threshold. Tuesday evening, the 159 liters of American black gold were trading at 107.82 dollars, a jump of more than 3.4%.

Citing sources familiar with the matter, the Bloomberg agency understands that the White House should announce on Thursday a plan to draw up to one million barrels a day from American strategic reserves. The unprecedented initiative could last several months, while strategic reserves currently stand at 568 million barrels, according to the latest figures from the US Energy Information Agency (EIA).

Ceasefire in Mariupol

The White House this month imposed an embargo on oil from Russia as part of a series of far-reaching sanctions against the country for its invasion of Ukraine. The decision pushed prices higher and put additional pressure on global inflation, which was already hitting highs not seen in decades.

On the frontline of the Russian invasion of Ukraine, the Russian Defense Ministry announced on Wednesday evening a ‘regime of silence’, or a local ceasefire, from 10:00 a.m. Thursday in the besieged Ukrainian port of Mariupol to evacuate civilians. This measure should make it possible to open a humanitarian corridor to the Ukrainian city of Zaporozhye with a stopover via the port of Berdiansk, under Russian control.

Appearing to go back on announcements made by Moscow after talks between the belligerents on Tuesday in Istanbul, Russian presidential spokesman Dmitry Peskov had previously said he could not ‘report anything very promising or ‘some breakthrough’.

Concerns about demand in China following Shanghai’s lockdown announcement added to the downside pressure. The International Energy Agency (IEA) for its part urged other countries to draw more on their reserves.

OPEC+ meeting

The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their ten allies led by Moscow (OPEC+), who meet on Thursday, should still maintain their strategy of very timid opening of their floodgates. black gold, with a further increase in the total level of production of 400,000 barrels per day for the month of May, according to analysts.

“OPEC+ has surprised the markets several times during its monthly meetings, but the base scenario, for now, is that the status quo will be maintained,” predicts Stephen Innes, analyst at SPI Asset Management. “The signals do not suggest any deviation” from the policy started in the spring of 2021, he continues.

Expectations are however immense, oil having touched on March 7 its historic price records reached during the financial crisis of 2008. Since then, prices have unscrewed from their peaks, making ‘even less likely that OPEC + more broadly its production,” comments Carsten Fritsch, analyst for Commerzbank.

For OPEC+, which was created in 2016 with a view to regulating the market, the recent surge ‘is mainly due to geopolitical risks, and not to a real shortage of supply’, recalls-t -he. The war raised fears of disruptions in Russian oil supplies and caused extreme volatility, with prices soaring on news of Western sanctions against Moscow, or falling on hopes of progress in peace negotiations.

Calls from the international community have however multiplied, especially after the decision of the United States and Great Britain to stop importing oil from Russia, the second largest exporter of crude oil in the world behind Saudi Arabia.

/ TTY

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