Crude oil dips on easing supply concerns as IEA releases stockpile from SPR

Highlights

• Crude oil prices tumbled on Monday.
• IEA member countries have agreed to release 60 million barrels from their strategic reserves, over the next six months.
• The prices were additionally weighted due to subdued demand in China, one of the largest consumers in the world.

Following the second straight weekly decline, crude oil prices tumbled on Monday as the world consumers announced their plans to release a substantial amount of crude from their strategic petroleum reserves (SPR). The prices were additionally weighted due to subdued demand in China, one of the largest consumers in the world.

The prices rose earlier as much as 2% on Friday but notched their second straight weekly decline after countries announced plans to release crude from their strategic stocks.

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The members of the International Energy Agency (IEA) decide to release 120 million barrels from strategic reserves to suppress price gains. This will include 60 million barrels from the US alone as a part of the country's previous announcement to release 180 million barrels.

The prices were also weighted due to subdued demand in China, one of the leading consumers in the world. The authorities have kept Shanghai, a city of 26 million people, locked down under its "zero tolerance" for COVID-19.

The prices of Brent Crude oil settled at US$102.78/bbl, up 2.19% and WTI Crude oil closed up US$2.23 at US$98.26/bbl.

Source: EODHD/Others Eikon

On Monday, June delivery Brent Crude oil futures inched lower and last traded at US$100.54 per barrel down 2.21%, while May delivery WTI crude oil futures exchanged hands at US$96.02 per barrel, down 2.28% at 1:37 PM AEDT.

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Huge release from IEA

On Wednesday, IEA member countries agreed to release 60 million barrels from their strategic reserves, over the next six months. Furthermore, Japan also announced to release of 15 million barrels of oil from state and private reserves.

The significant release is expected to deter producers including the Organization of the Petroleum Exporting Countries (OPEC) and U.S. shale producers to boost their production despite crude oil prices hovering at a multi-year high level.

Source: © Lancemichaels | Megapixl.com

In total, 19 countries made commitments to release 120 million barrels in the next six months. The IEA is expected to release roughly 2 million barrels of daily supply for the next two months - plus another 1 million bpd from the US for four months after that. 

Also Read: Crude oil slides from multi-year highs as Iran talks rev up

Bottom Line

Crude oil prices tumbled significantly on Monday on easing supply shortage concerns as the world consumers announced their plans to release a substantial amount of crude from their strategic reserves. The prices were further weighted due to subdued demand in China amid ongoing lockdowns.

Here’s how commodities performed in the last week click here