HOUSTON: Oil prices were stable on Friday in choppy trading but remained on course for a second weekly fall after countries announced plans to release crude from their strategic stocks.
Brent crude futures were up 7 cents, or 0.08%, at $100.67 a barrel by 10:41 a.m ET (1442 GMT). US West Texas Intermediate (WTI) crude futures rose 30 cents to $96.32.
Both contracts are set to fall for a second consecutive week, with Brent on course for a 3.6% slide and WTI for a 3% decline. The benchmarks have been at their most volatile since June 2020 for weeks.
Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180 million barrel release announced in March.
“There’s some concern that by artificially lowering prices, you are only going to increased demand and that’s going to burn off that supply pretty quickly,” said Phil Flynn, an analyst at Price Futures Group.
The release could also deter producers, including the Organization of the Petroleum Exporting Countries (OPEC) and US shale producers, from accelerating output increases even with oil prices around $100 a barrel, ANZ Research analysts said in a note.
PVM analyst Stephen Brennock, meanwhile, questioned the impact of the reserves being released.
“Despite these unprecedented volumes, doubts remain whether this incoming flood of supply will address the shortfall in Russian crude,” he said.
JPMorgan expects the reserves release to “go a long way in the short term” to offsetting the 1 million barrels per day of Russian oil supply it expects to remain permanently offline. “However, looking forward to 2023 and beyond, global producers will likely need to ramp up investment to both fill the Russia-sized gap in supply and restock IEA strategic reserves,” the bank said in a note. The release from emergency stocks has also weakened the physical markets.
“The optics of a bearish physical market has been bearish for prices,” said Scott Shelton, energy specialist at United ICAP.
While Russia has found Asian buyers, Western buyers are shunning cargoes since the start of the conflict in Ukraine.
The Kremlin said on Friday that what it calls Russia’s “special operation” in Ukraine could end in the “foreseeable future” since its aims were being achieved and work was being carried out by both the Russian military and Russian peace negotiators.
Russia’s production of oil and gas condensate fell to 10.52 million barrels per day (bpd) for April 1-6 from a March average of 11.01 million bpd, two sources familiar with the data told Reuters on Thursday.
The US Congress voted to ban Russian oil on Thursday, while the European Union is considering a ban.
But demand uncertainties kept a lid on prices Friday after Shanghai extended its lockdown to contend with fast rising COVID-19 infections.
The market is still trying to put into play the impact of the China COVID situation, Flynn added.
Further pressure came from the strengthening US dollar, after signals that the US Federal Reserve could raise the federal funds rate another 3 percentage points by the end of the year.