Oil prices settled sharply lower on Thursday with the U.S. announcing its largest-ever release from the nation’s crude reserves and the Organization of the Petroleum Exporting Countries and its allies sticking to a previously agreed plan to raise output in May.
Price action
- West Texas Intermediate crude for May delivery fell $7.54, or 7%, to settle at $100.28 a barrel on the New York Mercantile Exchange., the lowest finish since March 16, according to Dow Jones Market Data. Based on the front month, prices rose 4.8% for the month and gained over 33% for the quarter.
- May Brent crude, the global benchmark, fell $5.54, or 4.9%, to end at $107.91 a barrel on ICE Futures Europe. The contract expired at the end of the session, up nearly 6.9% for the month and up almost 39% for the quarter. The most-active June contract fell $6.73, or 6%, at $104.71.
- May natural gas rose 0.7% to $5.642 per million British thermal units, for a monthly rise of more than 28% and quarterly climb of over 51%.
- April gasoline slumped 4.1% to $3.19 a gallon, with prices up 14% for the month and up 43% for the quarter. April heating oil fell 3.1% to $3.691 a gallon, posting a monthly rise of 22.5%, and quarterly climb of over 58%. Thursday marked the expiration day for the April petroleum product contracts.
Market drivers
President Joe Biden said be’s authorizing the release of 1 million barrels of oil per day for the next six months from the U.S. Strategic Petroleum Reserve, or more than 180 million barrels in total.
It’s “essentially a temporary measure designed to minimize the spring rally [in prices], and to that end, it could increase supplies marginally and thereby keep prices commensurately lower,” said Marshall Steeves, energy markets analyst at S&P Global Commodity Insights. “However, the war in Ukraine remains the overriding consideration and the possible loss of Russian output is the motivating factor.”
Among the bullish risks, a team of commodity analysts at Goldman Sachs led by Damien Courvalin, in a note on Thursday said they see potential logistical bottlenecks to any U.S. SPR release, such as congestion on the Gulf Coast that might slow shale production.
Meanwhile, OPEC+ held the line in its Thursday meeting, rubber-stamping a previously agreed plan that will lift its production target by 432,000 barrels a day in May. OPEC+ has resisted calls by the Biden administration and other energy-consuming countries to more rapidly boost output.
The U.S. SPR release could relieve the United Arab Emirates and Saudi Arabia from bringing spare capacity into production, said Steeves.
Elsewhere, Russia is reportedly offering hefty discounts of its oil to India, amid sagging demand due to those sanctions, Bloomberg reportedon Thursday, citing sources.
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