In the stable case: The price of oil has been correcting sharply lower for a week. There are many reasons for this. One is an “unprecedented move” by the US, market analysts say.
The price of oil has been losing value for a week. This Friday, the North Sea Brent variety was trading at a maximum of 102.35 dollars per barrel, down 2.3 percent. The price of US WTI oil fell 2.5 percent to $97.78 a barrel. This means that the price of a barrel of Brent or WTI oil has fallen by around 14 percent since last Friday.
This has several triggers: the most recent is the recent announcement by Joe Biden, who announced Thursday night that release America’s strategic oil reserves. Between May and October, the United States wants to gradually release 180 million barrels, an unprecedented amount, write analysts at Commerzbank.
The launch will increase the daily supply of oil in the market by 1 million barrels during the period. The member countries of the International Energy Agency are discussing today how to coordinate the launch. Biden took the move after oil prices spiked sharply with the outbreak of the Russian war in Ukraine.
The coronavirus situation in China weighs on the market
Before the US president’s announcement, recent events in China had already weighed on oil prices. An outbreak of coronavirus, among other things, forced the economic metropolis of Shanghai into a strict lockdown. Some companies had to reduce their production due to confinement rules. Analysts therefore feared a decline in demand.
A ceasefire in Saudi Arabia also affected the price decline last week. Attacks by Yemen’s Houthi rebels on Saudi oil facilities had cut off supply. With the ceasefire, concerns about a drop in Saudi oil on the world market were allayed.
Russia is one of the largest oil producers.
The situation in the oil market remains tense due to the mixed situation. It is difficult for analysts to assess the impact of the war in Ukraine on the market: Russia is one of the world’s largest oil producers.
At the same time, the pandemic situation in China is getting worse. The domestic vaccine is considered to be significantly less effective against new corona variants than Western vaccines. However, these are not allowed in China, except in some commercial regions such as Hong Kong.