Crude oil prices increased on Thursday, recovering from a three-week low hit the day before, when consuming countries announced a large release of oil from emergency stockpiles, despite concerns about tight supplies clouding the market picture.
At 0651 GMT, Brent crude prices were up $1.42, or 1.4 percent, to $102.52 a barrel, while WTI crude futures were up $1.55, or 1.6 percent, to $97.78 a barrel.
In the previous session, both benchmarks fell more than 5% and closed at their lowest levels since March 16.
Member nations of the International Energy Agency agreed on Wednesday to release 60 million barrels in addition to the 180 million barrels pledged by the US last week to assist down prices in a tight market following Russia’s invasion of Ukraine. find out more
Despite the release of emergency oil supplies, experts and dealers claimed supply remained constrained.
“The oil release from IEA members demonstrates great political determination against Russia oil for its invasion of Ukraine,” a Shanghai-based oil dealer said, “but it’s not enough to cover the actual supply gap.”
Despite huge discounts, state refiners in China, the world’s biggest oil importer, are honoring existing Russian oil contracts but avoiding new ones, heeding Beijing’s call for prudence. find out more
“In a world without inventory buffers, demand destruction and recession are now the main price-lowering mechanisms,” said Stephen Innes, managing director of SPI Asset Management.
According to National Australia Bank analyst Baden Moore, the current release, together with the IEA’s coordinated release released on March 1, corresponds to an additional 1 million barrels per day of supply from May until the end of 2022, putting a ceiling on prices in the near term.
Moore said in a note that “the increased supply minimizes the near-term upside risk to the market and likely eliminates the need for refinery reduction in the near term.”
“The need to refill reserves, which is predicted in 2023,” he noted, “adds to the forward market tightness as the underlying supply picture remains unaltered, shifting the price risk to the upside.”
Indirect discussions between Iran and the US on renewing a 2015 agreement on Tehran’s nuclear program have been stalled, further delaying the possibility of lifting sanctions on Iranian oil, keeping the market tight.
Negotiators said Tehran and Washington must make political decisions to resolve the outstanding concerns. find out more