On Monday, oil skidded after a second straight weekly plunge on plans to release record volumes of crude products from strategic stocks.
Brent oil futures for June 22 slashed 3.15% or 3.25 points to $99.56 per barrel. The international benchmark reversed its Friday gain of 2.19% to $102.78 per barrel.
Similarly, the West Texas Intermediate oil contracts for May 22 lost 3.54% or 3.49 points to $94.75 per barrel. The US benchmark dropped the upturn of 2.32% to 98.26 per barrel in the previous session.
Despite these downward movements, Bank of America maintained its forecast for Brent crude to average $102.00 per barrel for 2022-23. However, it lowered its summer spike price to $120.00.
At the same time, Swiss investment bank UBS reduced its June Brent estimate by $10.00 to $115.00 a barrel.
Analysts explained that the release of strategic government oil reserves should ease some market tightness over the coming months. The move would reduce the need to increase crude prices to trigger near-term demand destruction.
Accordingly, International Energy Agency (IEA) member nations will release 60.00 million barrels over the next six months. This initiative is with the United States issuing a 180.00 million barrel.
These aimed to offset a shortfall in Russian crude after Moscow received heavy sanctions over its invasion of Ukraine.
Strategic Petroleum Reserve’s (SPR) discharge volumes equal 1.30 million barrels per day. Experts said it is enough to counter the anticipated shortage of 1.00 million bpd of the Kremlin oil supply.
Meanwhile, the European Union’s executive currently drafts proposals for a possible EU oil embargo on Russia. Nevertheless, there is still no agreement to ban the country.
Oil slips amid lockdowns in China
Moreover, the oil market declined due to the prolonged lockdowns in China, the largest importer of crude. The pandemic-driven mobility restrictions in the region negatively impact both industrial output and domestic consumption.
For instance, authorities have kept Shanghai, a city of 26.00 million people, under its zero-tolerance policy for COVID-19. They announced that they would slightly ease lockdowns in several areas of the financial hub starting today.
Eventually, fuel demand in India, the world’s third-biggest oil importer, and consumer rose to a three-year high in March. In addition, the country’s petrol sales touched a record peak.
In line with this, US President Joe Biden will hold a virtual meeting with Indian Prime Minister Narendra Modi today. The White House has made it clear that it does not want to see India’s uptick in Russian energy imports.
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