Weekly Gains Despite Recent Declines
Despite the recent decline, Brent crude and U.S. West Texas Intermediate crude futures were still on track for a weekly gain of around 3%-4%. This recovery comes after their most significant monthly weekly drops, caused by a banking sector crisis and recession fears.
No Immediate Plans to Refill U.S. Oil Reserve
Hiroyuki Kikukawa, general manager of research at Nissan Securities, noted that the market sell-off is due to the belief that the United States will not refill its oil reserve even if WTI prices are within the $67-$72 per barrel range. Energy Secretary Granholm confirmed that taking advantage of low prices this year would be difficult.
SPR at its Lowest Level Since 1983
The Strategic Petroleum Reserve is at its lowest level since 1983, following sales directed by President Joe Biden last year. The White House announced in October that it would repurchase oil for the SPR when prices were at or below $67-$72 per barrel.
Russian Crude Supply Adds Pressure
According to Kikukawa, continued crude supply from Russia to the global market also contributes to the pressure on oil prices. Lingering anxiety about the banking sector may lead the benchmarks to test their lows from earlier this week.
Russia's Reduced Production Cut
Deputy Prime Minister Alexander Novak stated that Russia's previously announced cut of 500,000 barrels per day (bpd) in oil production would be from an output level of 10.2 million bpd in February. This means Russia aims to produce 9.7 million bpd between March and June, a smaller reduction than previously indicated.
Chinese Demand for Commodities Surging
On a positive note, Goldman Sachs reported that commodities demand in China, the world's largest oil importer, is surging. China's oil demand now exceeds 16 million bpd.