According to Bloomberg News, oil is about to head for a significant weekly loss in almost 24 months following the Biden administration’s order of an unprecedented release of strategic US reserves so that the rampant prices can be tamed.
West Texas Intermediate futures oscillated at $100 per barrel Friday after plunging 7% in the earlier session. The United States has plans to release 1 million barrels per day for the next six months, even though analysts have warned that it would be a short-lived reprieve. The news was revealed Thursday in the markets before OPEC+alliance gathered to approve the increase for May’s supply.
The Russian invasion of Ukraine has dwindled the commodity markets and led to an increase in the cost of everything from fuel to food, throwing a challenge to the governments that seek to foster economic growth following the pandemic. The ongoing war has led to a turbulent trading oil market, causing wild swings during the entire March sessions.
Under pressure
President Joe Biden blames a surge in the price of gasoline this year due to his counterpart Vladimir Putin and the ongoing Ukraine invasion, and Biden has called this “Putin’s price hike.” The US oil companies have also received criticism from Joe Biden as these companies are hesitant in boosting production. The price of retail gasoline at the pumps was high before the invasion; however, the war has pushed the prices further up.
There have been two instances when the United States had to tap into its reserves twice in the last six months, and it has contributed very little to keeping the prices down. He also stated that the allies might release 30 million to 50 million additional barrels from their reserves. The prices of American crude oil stumbled.
Bloomberg News reports that Goldman Sachs Group Inc. has cut the forecast for Brent by $10 per barrel in the second half to $125 due to the news of the US release. The bank has stated that this decision will not help resolve the structural deficit of oil.
There was pressure faced by the markets this week due to concerns that China being the largest importer of oil, is implementing a lockdown due to a rise in the number of Covid-19 cases. These lockdown restrictions adversely impact the economy, thereby witnessing a contraction of manufacturing activity in March.
