Oil prices seesawed today ahead of a meeting of consuming nations to discuss a new release of emergency oil reserves alongside a huge planned release by the US.
US West Texas Intermediate (WTI) crude futures dipped 6 cents to $100.22 a barrel in early trade after trading as high as $101.75. The contract had slumped 7% yesterday.
Brent crude futures rose 5 cents to $104.76 a barrel, after dropping 5.6% yesterday. The May contract expired on Thursday at $107.91.
The planned US release caused yesterday’s falls. The two benchmark contracts were today each headed for a weekly loss of around 13%, their biggest in two years.
International Energy Agency (IEA) member countries are set to meet today to discuss a further emergency oil release that would follow their March 1 agreement to release around 60 million barrels.
US President Joe Biden yesterday announced a release of 1 million barrels per day for six months starting in May. That will be the largest release ever from the US Strategic Petroleum Reserve (SPR).
The aim is to make up for disrupted oil supplies from Russia, hit by sanctions following its invasion of Ukraine. Moscow calls its activity in Ukraine a “special operation” to disarm its western neighbour.
Traders are waiting to see how much oil the IEA countries agree to release but do not expect it to have much long-term effect on the market.
“Previous releases from the SPR have taken time to reach the market and have had little impact on prices,” ANZ Research analysts said in a note.
While Biden called for US producers to step up output, ANZ analysts said the massive SPR release could actually backfire and discourage producers from drilling more.
“The scale of the proposed release is large enough to mostly, or even completely, fill the supply deficit in the crude oil market for a period,” Commonwealth Bank commodities analyst Tobin Gorey said.
“The action would likely cap prices for that period, after which the market would then be relying on OPEC+ to increase production,” he said.
The Organization of the Petroleum Exporting Countries and allies including Russia, together called OPEC+, stuck to plans to add a modest 432,000 barrels per day of supply in May, despite western pressure on Saudi Arabia and the United Arab Emirates to use their spare capacity to boost output further.