July 14, 2024

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Oil drops 5%, cools off from Russian oil shock rise

Oil drops 5%, cools off from Russian oil shock rise
  • The head of the International Energy Agency says the agency can release more oil from stockpiles
  • US bans Russian oil imports, UK to phase out
  • US Crude Oil, Fuel Stocks Falling, Strategic Petroleum Reserves at a Low 2002 – EIA
  • Chief negotiator for Iran nuclear talks returns to Vienna

BENGALURU (Reuters) – Oil fell more than 5% on Wednesday, retreating from a rally to peaks not seen in more than a decade, as some investors’ fears of Russian supply disruptions and the head of the International Energy Agency eased. The agency said that the agency may exploit oil stocks more.

The market surged more than 30%, with global benchmark Brent crude reaching its highest level in 2008 at $139 a barrel, since Russia, the world’s second-largest exporter of crude oil, invaded Ukraine on February 24, and the world responded with financial sanctions, and this week, Ban on importing oil.

Brent crude fell $5.26, or 4.1 percent, to $122.72 a barrel at 11:25 am EST (1625 GMT), after falling earlier to $120.04. US West Texas Intermediate fell $4.64, or 3.8 percent, to $119.06 a barrel.

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Brent crude has been up 28% in the past six trading days, and the Relative Strength Index, a momentum indicator, is indicating that the market was about to sell.

“There was definitely room for some easing here,” said Bob Yoger, director of energy futures at Mizuho. “At these levels, there were buyers on the verge of running out.”

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US President Joe Biden on Tuesday imposed an immediate embargo on Russian oil, but major European countries have not joined in, in large part because those countries rely more on Russian oil. Read more

Britain said on Tuesday it would phase out Russian imports and stop many buyers from buying Russian crude. JPMorgan estimated that about 70% of Russian seaborne oil was struggling to find buyers. Read more

A worker walks in front of a crane at an oil field owned by Bashneft near the village of Nikolo Berezovka, northwest of the city of Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergey Karpukhin

The United States imported more than 20.4 million barrels of crude and refined products per month from Russia in 2021, about 8% of U.S. imports of liquid fuels, according to the Energy Information Administration. Read more

“In theory, the United States could compensate for the outages in Russia with its own production,” Commerzbank’s Karsten Fritsch wrote in a report.

The head of the International Energy Agency said its decision last week to release 60 million barrels of oil from strategic reserves was an “initial reaction”. Read more

“If there is a need, if our governments decide to, we can bring more oil to the markets, as part of the response,” said Fatih Birol, head of the International Energy Agency.

His comments echo the words of the US State Department’s senior adviser, Amos Hochstein, who said at an industry conference on Tuesday, who also indicated the possibility of more releases.

US crude and fuel stocks fell last week, while Strategic Petroleum Reserve stocks fell to their lowest levels since July 2002.

One potential source of additional oil supplies is Iran, which has been in talks with Western powers for months about resuming the 2015 nuclear deal, which then-US President Donald Trump abandoned in 2018. Iran’s chief negotiator at the Vienna talks has returned to the Austrian capital. Wednesday. Read more

Additional reporting by Yuka Obayashi and Mohi Narayan; Editing by Margarita Choi and Nick McPhee

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