Global Oil Prices Drop as US Delays Replenishment of Reserves

Global oil prices fell on Friday in Asian trade due to comments by US Energy Secretary Jennifer Granholm who said it would be difficult to quickly replenish the country's Strategic Petroleum Reserve (SPR).

The comments contradict previous signals that the Biden administration would start replenishing the SPR if oil prices remain in the $67 to $72 per barrel range. In addition, uncertainty over OPEC production is also weighing on oil prices. The latest global oil price decline on Thursday following Granholm's testimony suggests lower buying in the near term. All these factors contributed to the decline in oil prices in Asian trading on Friday. The Biden administration has been conducting SPR sales that have pushed oil reserves to their lowest level in almost 50 years in 2022. In addition, the administration will release an additional 26 million barrels from the reserve as part of a congressional mandate. Brent crude futures fell 0.3% to $75.68 a barrel, while West Texas Intermediate crude futures fell 0.3% to $69.75 a barrel by 10:49 p.m. ET (02:49 GMT) and both contracts extended losses from Thursday. Still, crude prices are expected to rise between 3.7% and 5% this week after recovering from a 15-month low hit last week as concerns about the U.S. and European banking crisis grew. Fears that slowing economic growth would reduce oil demand continue to weigh on the market, while the Federal Reserve’s modest economic outlook has also dented sentiment. Oil prices have fallen sharply this year on such concerns, despite a recovery in China.

However, investment bank Goldman Sachs recently expressed a positive view that China will see a massive rebound in oil demand this year as it emerges from three years of COVID-19 lockdowns. Countries like the US, Europe and other major economies are also grappling with high inflation and interest rates, which are expected to weigh heavily on growth this year. The recent collapse of several US banks has also highlighted the impact of high interest rates on the economy. Uncertainty over OPEC+ production cuts has weighed on the crude market. Although some energy ministers have called on the cartel to help stabilize crude prices, a Reuters report suggests that OPEC+ is likely to keep output unchanged when it meets in early April.

In addition, OPEC+ member Russia also announced that it would cut production by a smaller margin than previously announced. This adds uncertainty to the crude oil market, and could have an impact on future prices.

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