Oil heads for weekly decline as US plans huge reserve release

Bloomberg

Oil headed for the biggest weekly loss in almost two years after the Biden administration ordered an unprecedented release of the US strategic reserves to tame rampant prices.
West Texas Intermediate futures swung between gains and losses Friday, and were down about 13% this week, the most since April 2020. The US plans to release 1 million barrels a day for six months, and President Joe Biden said he also expects allies will agree to release more oil from their own reserves.
Citigroup Inc said the US appeared to have taken steps to ensure that it could deliver the promised volumes, despite having never drawn down that much oil from the reserve stockpile. Goldman Sachs Group Inc. cut its price forecasts for this year but boosted the estimate for 2023, arguing that the move won’t fix a longer-term supply crisis.
Biden’s decision follows rocketing gasoline prices in America and concerns about supply shortages following Russia’s invasion of Ukraine. The war has roiled global commodity markets and driven up the price of everything from fuels to food. It has also led to tumultuous trading in oil, with massive intraday swings throughout March. WTI traded in almost a $37 range last month.
The Biden administration’s giant oil release puts it in stark contrast with Opec+, which has ratified a planned, modest production increase of about 430,000 barrels a day in record time.
The US already tapped its reserves twice in the past six months, but that’s done little to cool prices. As much as 180 million barrels may be released this time, and Biden said he expects another 30 million to 50 million more barrels from allies. American physical crude prices tumbled.
“There is a meeting that is going on right now of the IEA to look at additional releases from the international market,” said Amos Hochstein, the US State Department’s senior energy security adviser, said in an interview on Bloomberg Television. “The market is short about 2 million barrels a day, if not more, from Russian supplies into the global market. That is clear to me.”
The market also came under some technical pressure Friday as WTI breached its 50-day moving average for the first time since early January. Brent also slipped towards that level before rallying away from it.
Prices also slid this week amid concerns about Chinese demand as the world’s biggest oil importer implements a series of lockdowns to curb a resurgence of Covid-19. Those curbs are starting to affect the economy, with manufacturing activity contracting in March.