Oil slides as U.S. holds off refilling strategic reserve

Written by Ahmad Ghaddar

LONDON( Reuters )- Oil prices dropped sharply on Friday amid falling European banking shares and following U.S. Energy Secretary Jennifer Granholm’s remarks that it might take several years to replenish the country’S Strategic Petroleum Reserve ( SPR ), which would hurt demand prospects.

By 1031 GMT, Brent crude had dropped$ 2.50, or 3.3 %, to$ 73.41 per barrel, while West Texas Intermediate U.S. crude futures had fallen$ 2.47, 3.5 %, and$ 67.49, respectively.

Following their biggest weekly declines in months due to the banking sector’s unrest and concerns about a potential recession, both measures, which dropped by around 1 % on Thursday, were expected to end the week slightly higher.

Concerns that the worst issues in the field since the 2008 financial problems have not yet been resolved caused bank assets to decline in Europe, with Deutsche Bank and UBS Group being particularly hard hit.

The sell-off was already fueled by a stronger dollar, which increased 0.6 % against other currencies on Friday. Holders of many currencies must pay more for crude due to a stronger note.

According to PVM Oil scientist Stephen Brennock, the SPR’s lack of simplistic buying” represents a significant blow to the outlook for oil demand.”

He continued,” If anything, it may put even more pressure on China to lift the load on the interest side over the coming month.”

When prices were at or below$ 67 to$ 72 per barrel, the White House announced in October that it would buy back oil for the SPR.

Following sales directed by President Joe Biden last year, reserves are currently at their lowest level since 1983. Granholm warned lawmakers that it would be challenging to take advantage of lower prices this year to add to them.

The world’s largest oil buyer, China, is said to be experiencing a surge in commodity interest, with fuel demand topping 16 million bpd, according to Goldman Sachs.

Meanwhile, according to the RIA Novosti news agency, Russian Deputy Prime Minister Alexander Novak announced in February that Russia’s oil production would be reduced by 500,000 barrels per day( bpd ).

According to Novak, this may mean that Russia wants to produce 9.7 million bp between March and June, which would be a much smaller expenditure reduction than Moscow had previously stated.

( Edited by Jason Neely, additional reporting by Trixie Yap in Singapore and Yuka Obayashi in Tokyo. )

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