The Global Oil Price Has Fallen Under USD 100
On Monday, oil prices fell by USD 4 per barrel, with Brent crude falling below USD 100 due to plans to release record volumes of crude and oil products from strategic stocks and continuing coronavirus lockdowns in China. Brent crude for June delivery fell USD 3.93, or 3.8 percent, to USD 98.85 per barrel. West Texas Intermediate crude in the United States fell USD 4.19, or 4.3 percent, to USD 94.07.
Bank of America retained its anticipation for Brent Crude price to average USD 102 per barrel for 2022-2023 however reduced its summer spike price to USD 120. A Swiss investment bank, UBS, also lowered its June Brent forecast by USD 10 to USD 115 per barrel. Oil prices have fallen due to various factors, including hopes for progress in ceasefire talks between Russia and Ukraine, as well as expectations that demand from China will ease as COVID-19 cases there rise.
The release of strategic government oil reserves is expected to relieve some market tightness in the coming months, reducing the need for oil prices to rise to cause near-term demand destruction. Participant countries of the International Energy Agency (IEA) will issue 60 million barrels over the next six months. The US will match that as part of its 180-million-barrel release announced in March. The moves are intended to compensate for a shortfall in Russian crude after Moscow was sanctioned heavily for its invasion of Ukraine, which Moscow describes as a special military operation.
The European Union's executive is formulating proposed amendments for a possible EU oil embargo against Russia, according to the foreign ministers of Ireland, Lithuania, and the Netherlands on Monday, though no agreement to ban Russian crude has been reached. The market has also been keeping an eye on developments in China, where authorities have kept Shanghai, a city of 26 million people, under lockdown due to the zero-tolerance policy for COVID-19. Shanghai has announced that lockdowns in certain areas will be eased beginning Monday.
According to OANDA senior market analyst Jeffrey Halley, fears are growing that if China's Omicron wave spreads to other cities, the country's zero-COVID policy will result in mass extended lockdowns, affecting both industrial output and domestic consumption. The publication of Strategic Petroleum Reserve (SPR) volumes totals 1.3 million barrels per day (bpd) over the next six months, sufficient to compensate for a 1 million bpd shortfall in the Russian oil supply.
As per UBS analyst Staunovo, pandemic-related mobility restrictions in China, the world's largest oil importer, will affect oil demand and international sanctions in Russia. India, the world's third-largest oil importer, and exporter, saw a three-year high in fuel demand, with petrol sales reaching a record high. The White House announced that US President Joe Biden would hold a virtual meeting with Indian Prime Minister Narendra Modi on Monday, during the time when the US has made it apparent that it does not want India to expand its dependence on Russian energy imports.