Oil prices fell sharply amid lower European bank stocks and after the U.S. Energy Secretary said it could take several years to replenish the country’s strategic oil reserve, dampening the outlook for demand.
The price of Brent crude decreased by $1.56 (or 2.3%) yesterday. At the same time, WTI U.S. crude futures dropped $1.49, dropping 2.2% to $68.47 per barrel.
After retreating 4.2% earlier in the session, both benchmarks were on track to finish the week higher than last week–despite the biggest decline in months due to worries about banking sector instability and a potential recession.
European bank stocks declined, with Deutsche Bank and UBS Group facing heavy losses due to worries that the toughest issues facing the sector since the 2008 financial crisis have not been resolved yet.
When the value of the dollar increases, the cost of crude oil for those with other forms of currency also rises. A 0.62% rise of the dollar against other currencies on Friday further spurred the sell-off.
The White House said in October that it would buy oil for the SPR when prices were below $67-$73 per barrel.
It would be challenging to capitalize on the affordable prices this year to expand inventories, which have hit their nadir since 1983 due to the president’s unloading of stocks last year.
Expectations for an expansion in demand from China have fallen, and Goldman Sachs said demand for commodities is picking up in China, the biggest oil importer, where oil demand is well above 16 million barrels a day.
Meanwhile, Russia’s deputy prime minister said the previously announced 500,000 bpd cut in Russian oil production in February would be 10.22 million bpd.
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