Global Oil Prices Drop Below $100 for the First Time Since March

Oil prices fell by $4 per barrel on Monday, with Brent crude falling below $100 for the first time since 16 March amid preparations to release record amounts of petroleum and oil products from strategic storage, as well as China’s ongoing coronavirus lockdown. At the time of filing this report, Brent crude was down $4.1, or 3.99 percent, at $98.68 a barrel. US West Texas Intermediate (WTI) crude lost $4.28, or 4.28 percent, to sit at $94.07 per barrel. Member countries of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the US matching that as part of its 180 million barrel release announced in March. The measures are intended to compensate for a deficit of Russian crude after Moscow was sanctioned heavily for its invasion of Ukraine, which it claims was a “special military operation.” According to JP Morgan analysts, the release of Strategic Petroleum Reserve (SPR) volumes equals 1.3 million barrels per day (bpd) over the next six months, which is adequate to balance a 1 million bpd shortfall in Russian oil supplies. The release of strategic government oil reserves is expected to alleviate some market tightness in the coming months, lowering the possibility for oil prices to rise and causing near-term supply crunches all over again. Market players suggest that while this is the biggest release since the IEA stockpile was created in 1980, it will likely fail to ultimately change the fundamentals in the oil market and simply delay further increases in output from key producers.