Oil fell 5% as the United States planned to release crude reserves

  • The United States has decided to release 180 million barrels of oil
  • OPEC + stuck to an existing deal with an increase of 432,000 bpd in May
  • Limits have been set for the largest quarterly gain since Q2 2020

HOUSTON, March 31 (Reuters) – Oil prices fell nearly 5% on Thursday, with the United States set to announce the largest output from its strategic petroleum reserves, while OPEC + May stuck to its current contract for production.

Brent crude for May, which expires on Thursday, fell $ 5.36 or 4.7% to $ 108.09 a barrel at 13:41 p.m. The most actively traded June futures were down 4.5% at $ 106.48, down $ 7 in the previous session.

US West Texas Intermediate futures for May delivery were down $ 5.68 or 5.3% at $ 102.15 a barrel, down to $ 103.90.

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The pre-month futures for US crude and Brent are on track for their highest quarterly percentage gains from the second quarter of 2020.

The White House says on Thursday that US President Joe Biden will announce on Thursday that the United States will release 1 million barrels a day of oil from its strategic oil reserves in an effort to reduce petrol prices. [nL2N2VY1RT] read more

“This is a market where every barrel is calculated and (possibly SPR output) a significant amount of oil that will be kept on the market for a long time,” said John Gildoff, partner at Capital Capital LLC.

Analysts at Commerzbank have noted that if such a dramatic release of emergency reserves actually happens, the oil market will no longer deliver in the second quarter, and even more in the third quarter based on the International Energy Agency’s current forecasts.

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Susanna Streeter, a senior investment and market analyst at Hargreaves Lansdowne, said any SPR release could be a sign that Washington was not expecting a quick solution to the crisis, which has drastically reduced oil supplies to Ukraine.

On March 11, 2022, Carson, California, found storage tanks at Marathon Petroleum’s Los Angeles refinery, which processes domestic and imported crude oil from the California Air Resources Board (CARB), petrol, diesel fuel and other petroleum products. The picture was taken by a drone. REUTERS / Bing Guan

“Frustrated times are a clear call to action, and the Biden administration hopes that the increase in oil prices will guarantee that the move will eat into the nation’s emergency supplies,” Strider said.

Goldman Sachs analysts say the move could help restructure the oil market in 2022, but it will not be a permanent solution.

“However, it will remain an output of oil cargo and will not be a steady supply of supplies for years to come. Such output will not solve the construction shortage for many years,” they said.

Analysts pointed to lower cash flow in the market, causing prices to move higher.

“We have seen a decline in apparent interest and a decline in volumes. A thin market is a jumping market and highly responsive to these various developments.

Meanwhile, the Organization of the Petroleum Exporting Countries and allies, including Russia, also known as OPEC +, agreed at its meeting on Thursday to stick to its current agreement and raise its May production target to 432,000 barrels per day (bpd).

“In light of the overnight developments, the OPEC + decision does not appear to be an event. The 432,000 bpd increase is expected and the price is structured. This decision will be welcomed with the disappointment of consuming countries,” Tamas Varga told PVM Oil Associates.

A spokesman for the New Zealand Energy Ministry said the IEA member states would meet at 1200 GMT on Friday to decide on a possible joint oil release.

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As Shanghai seeks to expand its COVID-19 lockdown, prices have also fallen due to fears that demand in China will be lower.

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Report by Florence Dawn and Isabel Gua in Singapore; Editing by Marguerite Choi, David Gregorio and Nick McPhee

Our standards: Thomson Reuters Trust Principles.

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