Oil prices tumbled on Thursday as the US announced it would release a record amount of oil from its stockpiles to fight soaring prices over supply fears sparked by the Ukraine war.
President Joe Biden will announce later on Thursday the release of a record million barrels of oil a day for about 180 days from US strategic stockpiles, the White House said.
Reports of the move had already sent London’s Brent crude and New York’s WTI diving around six percent earlier in the session. Both were still around four percent lower, at prices well above $100 a barrel.
Crude prices have spiked in recent weeks over fears of a major supply shortfall after Russia — the world’s second biggest exporter of oil after Saudi Arabia — invaded Ukraine on February 24.
The international benchmark contract, Brent North Sea crude, flirted with a record high in early March as it soared to almost $140 per barrel.
Ignoring Western pressure to significantly boost production to ease prices, the OPEC group of oil producing countries and its Russia-led allies agreed another modest oil output increase on Thursday.
The 13 members of the Saudi-led Organization of the Petroleum Exporting Countries and their 10 partners backed an increase of 432,000 barrels per day in May, marginally higher than in previous months.
The group, known as OPEC+, said in a statement following a ministerial meeting that the “continuing oil market fundamentals and the consensus on the outlook pointed to a well-balanced market”.
”Today Opec+ decided against the change in direction that might have helped bring the price of a barrel of Brent Crude back under $100 a barrel, several members steadfastly refusing to engage in global politics instead insisting balancing oil markets must take precedence,” AJ Bell analyst Danni Hewson said.
‘Remains tight’
However, attention was focused on the US plan — although analysts downplayed its likely impact on the oil market.
“Sanctions against Russia have distorted supply and though Washington’s move to release stored oil has cooled markets it’s only a stop gap,” AJ Bell’s Hewson said.
OANDA’s Edward Moya said that Biden was “feeling the pressure from Americans as inflation is getting uglier” and stressed that Ukraine peace efforts were the key to oil woes.
“This oil market will remain tight and any coordinated tapping of strategic reserves will only be effective if peace talks in the war in Ukraine are headed in the right direction,” he said.
“If it becomes clear that a major de-escalation in the war is not going to happen, then oil could surge back to the recent highs.”
Stock markets fell after Russia poured cold water on hopes that ceasefire talks with Ukraine were progressing, leaving the prospect of a protracted war.
Energy majors, like Britain’s BP and France’s TotalEnergies, saw their share prices drop as lower crude prices bites into revenues and profits.
President Vladimir Putin on Thursday warned “unfriendly” countries, including all EU members, that they would be cut off from Russian gas unless they opened an account in rubles to pay for deliveries.
Wall Street was down in early trading following mixed economic data, including disappointing US spending figures in February as shoppers contended with a 6.4-percent jump in prices compared to February 2021.
The Ukraine war has already sent shockwaves through the world economy, with growth forecasts this year being lowered across the board.
The European development bank, EBRD, forecast gross domestic product in Russia and Ukraine would shrink 10 percent and 20 percent respectively this year.
London stocks dipped on Thursday as data showed that the UK economy rebounded slightly less than initially thought last year and ahead of a far tougher 2022 on fallout from the Ukraine war and rampant inflation.
Asian equities fell after three days of healthy gains.
Adding to selling pressure was data showing signs of a further slowdown in China’s manufacturing sector caused by Covid lockdowns.