Oil slipped on Monday in volatile trading as the release of strategic reserves by consuming nations eased concerns over tight supply amid Russia’s invasion of Ukraine and the lack of an Iranian nuclear deal.
Crude dropped by about 13% last week after U.S. President Joe Biden announced a record U.S. oil reserves release and as International Energy Agency members committed to further tapping reserves. Crude had hit $139 last month, its highest since 2008.
“The massive release of 1 million barrels per day over a period of six months in the United States alone is likely to ensure that the oil market is no longer acutely undersupplied in the second and third quarters,” Carsten Fritsch of Commerzbank wrote in a report.
Brent crude was down 67 cents, or 0.6%, at $103.72 a barrel by 1010 GMT. U.S. West Texas Intermediate crude fell 57 cents, or 0.6%, to $98.70. Both contracts were up over $1 earlier in the session.
Russia’s invasion of Ukraine in February intensified supply worries that were already underpinning prices. Sanctions imposed on Russia and buyers’ avoidance of Russian oil have already led to a drop in output and raised fears of larger losses. [IEA/M]
The reserves release will alleviate but not eliminate a supply deficit, oil broker PVM said.
“In view of this, it will take a brave man to bet on oil prices finding a new home below $100 a barrel,” said Stephen Brennock of PVM.
Additional downward pressure came from a truce in Yemen, which could ease threats to supply in the Middle East.
The United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict. Saudi oil facilities have come under Houthi attack during the fighting.
Oil gained support from a pause in talks to revive the Iranian nuclear deal, which would allow a lifting of sanctions on Iranian oil. Iran on Monday blamed the United States for the halt.
