Oil futures seesawed between losses and gains on Friday, a day after posting sharp losses driven by news of the largest-ever release from U.S. crude reserves. Oil was facing its biggest weekly percentage loss since the early weeks of the pandemic.
- West Texas Intermediate crude for May delivery CL00 CL CLK22 slipped 69 cents, or 0.7%, to $99.59 a barrel on the New York Mercantile Exchange after dropping 7% on Thursday. Front-month prices closed out the first quarter with a 33% gain and a 4.8% rise for March.
- June Brent crude BRN00 BRNK22, the global benchmark, fell 17 cents, or 0.1%, to $104.54 a barrel. For the week, it trades down more than 10%. The expired May Brent had climbed nearly 6.9% for the month and 39% for the quarter.
- May natural gas NGK22 rose 0.6% to $5.676 per million British thermal units, and saw a March rise of more than 28% and quarterly climb of over 51%.
- May gasoline RBK22 fell 0.2% to $3.145 a gallon and May heating oil HOK22 rose 2% to $3.427 a gallon.
Oil markets were consolidating after Thursday’s selloff, triggered by President Joe Biden authorizing the release of 1 million barrels of oil per day for the next six months from the U.S. Strategic Petroleum Reserve.
The move could keep a lid on prices in the near term, analysts said, but they see it as only a temporary fix for tight global supplies, especially as the war in Ukraine grinds on.
“The fact of the matter is that, right now, a roughly 2 million [barrel per day supply deficit is still expected…through the end of the year, which leaves the fundamental backdrop of the oil market still bullish,” analysts at Sevens Report Research wrote in Friday’s newsletter. That’s despite the planned SPR releases.
The International Energy Agency was expected to hold an emergency meeting on Friday to discuss potentially also releasing strategic reserves alongside the U.S., Reuters reported.
But a volatile week was set to leave U.S. crude, on a front-month contract basis, with a bruising drop of over12% and Brent crude is set for a more than 10% weekly drop. Both are poised for their biggest weekly percentage declines since April 2020, according to FactSet.
Geopolitical headlines continued to attract attention on Friday after Russia accused Ukraine forces of an attack on an oil facility just north of the border between the two countries. Peace talks between the two sides by videoconferencing as fighting on the ground continued.
Thursday also saw an OPEC+ meeting that rubber-stamped a previously agreed plan that will lift its production target by 432,000 barrels a day in May.
“OPEC+ continues to snub calls from the U.S. and other Western powers to raise output to quell the tight market conditions,” the Sevens Report analysts said. The group is remaining “very disciplined in this high price environment” and that adds a tailwind for the months and quarters ahead.
“Bottom line, once a ceasefire is finally agreed upon between Russia and Ukraine, expect a sell-the-news reaction, though the long-term trend does still remain decidedly bullish right now,” they said.