Crude oil tumbles as US plans largest ever release from SPR

Highlights

• Crude oil prices tumbled on Monday.
• US President Joe Biden announced a release of 1Mbpd of crude oil for six months, starting from May.
• Analysts across the globe believe that the release of crude oil from SPR may provide temporary relief in cooling oil prices.

Crude oil prices further dip on Monday, extending their last week’s downfall as members of the International Energy Agency (IEA) agreed to be united for the largest-ever U.S. oil reserves release.

On Thursday, US President Joe Biden announced a release of 1Mbpd of crude oil for six months, starting from May. This is the largest release ever from the US Strategic Petroleum Reserve (SPR).

A day earlier, prices of both oil benchmarks jumped nearly 3% on the back of a heavy crude stock drawdown in the US, indicating investors’ wariness about new Western sanctions on Russia.

Crude oil prices have followed an upward trajectory since the start of 2022, initially due to a solid economic recovery after pandemics and further supply shortage concerns due to the conflict between Russia and Ukraine.

The prices started their bull run on 24 February 2022; the day Russia officially announced Ukraine’s invasion. The chaos between both nations has created the supply shortage fear among traders over the Russian oil embargo, as Russia is a significant crude supplier. As a result, the prices of both oil benchmarks reached 14-year high level during the first half of March 2022.

On Friday, Brent Crude Oil futures settled 0.3% down at US$104.39/bbl while WTI futures dipped US$1.01/bbl to close at US$99.27/bbl.

Source: EODHD/Others Eikon

Image Description-Crude oil financial chart

On Monday too, the prices of both oil benchmarks continued their downward movement. June delivery Brent Crude oil futures declined and last traded at US$103.73 per barrel down 0.59%, while May delivery WTI crude oil futures exchanged hands at US$98.58 per barrel, down 0.66% at 10:43 AM AEDT.

Also Read: Crude oil surges to 14-year highs on delays in Iranian talks

Temporary price relief

Analysts across the globe believe that the release of crude oil from SPR may provide temporary relief in cooling oil prices. The amount of crude oil expected to be released is much lower than the expected 3Mbpd of Russian oil, which will be shut in as Russian sanctions would remain in place.

Adding to this, the Organisation of the Petroleum Exporting Countries (OPEC) along with its allies, together known as OPEC+ also stuck with plans for an increase of 432,000bpd to their May output range, despite the US calling producers to boost production.

Must Watch: As Russia-Ukraine War Intensifies, Commodities Also Soars

Furthermore, in a bearish signal for oil demand, China's commercial hub – Shanghai ground to a halt on Friday, after the government locked most of the places in the city to curb COVID-19 spread.

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

Bottom Line

Crude oil prices tumbled significantly on Monday continuing their downfall from the last week as members of the International Energy Agency agreed to be united for the largest-ever U.S. oil reserves release.

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