On Thursday (March 23), crude oil futures closed lower after U.S. Energy Secretary Jennifer Granholm said that replenishing the U.S. Strategic Oil Reserve (SPR) could take years.
WTI crude futures were down 94 cents, or 1.3%, at $69.96 a barrel, while BRENT crude futures were down 78 cents, or 1%, at $75.91 a barrel.
Ms. Granholm’s remarks to Congress about the time it would take to replenish the SPR oil reserves sparked investor concerns about oil oversupply, particularly at a time when the U.S. Department of Energy is continuing to move ahead with plans to drain 26 million barrels of oil from the SPR after approval by Congress. This move has led to the lowest level of oil in stocks in 40 years, since 1983.
Giovanni Stonovo, an analyst at UBS, noted that Ms. Granholm’s comments added to the market’s oversupply concerns. Meanwhile, during the day, crude futures were supported by the U.S. Federal Reserve (Fed) signaling an end to its cycle of rate hikes. This, together with the dollar’s depreciation, helped make crude oil contracts cheaper and more attractive to investors holding other currencies.
Investors are now awaiting the committee meeting of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC Plus on April 3. According to sources, OPEC+ is likely to maintain its oil production policy by cutting output by 2 million barrels per day until the end of 2023, despite the recent banking crisis. The OPEC+ decision may provide some clarity to the oil market, which has been grappling with oversupply concerns and volatile prices.
The recent developments in the oil market highlight the volatility and unpredictability of the energy sector, with geopolitical tensions and market forces shaping supply and demand. As investors continue to monitor the developments in the oil market, the industry is bracing for potential challenges ahead.
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Friday, March 24, 2023