Americas News
More Big Losses For Oil As IEA Agrees To Tap Emergency Reserve
The International Energy Agency announcing it will release 60 million barrels of oil from emergency stockpiles to augment the planned U.S. release caused another significant drop in crude prices on Wednesday, although Goldman Sachs warned that the commodity will suffer "severe" constraints in the near future.
West Texas Intermediate fell $5.73 to settle at $96.23 per barrel, while Brent settled down $5.57 to $101.07 per barrel.
John Kilduff, founding partner at Again Capital, said, "The IEA's consideration of releasing more SPR barrels beyond the U.S. is another bearish factor today, as the planned amount of released supplies is adding up, at this point, easing some of the supply fears."
Callum MacPherson, head of commodities at Investec, offered a slightly different market assessment by remarking, "Everything to me points to the market being in a pretty difficult place on the supply side; the main bearish point I can see is the China Covid outbreak, everything else looks pretty bullish."
MacPherson was referring to China's zero tolerance policy for Covid, which has resulted in cities including Shanghai being placed under complete lockdown even though the virusat this stage is comparable in severity to that of a seasonal flu.
As if to support MacPherson's observation, Bloomberg on Wednesday reported that U.S. East Coast jet fuel stockpiles fell for a third straight week to their lowest level seasonally since 1996; the product is fetching $7.49 per gallon, nearly double the spot price of diesel in New York and more than 1.5 times that of gasoline.
This was driven partly by the number of passengers going through U.S. airports averaging 2.08 million per day in the first five days of April, just 9.9 percent lower than the same period in 2019, according to the Transportation Security Administration.
As far as Jeff Currie, global head of commodities at Goldman Sachs is concerned, oil supply constraints will soon be "severe" and reminiscent of those seen in the 1970s.
He told media, "Overall CapX is down 35 percent yet demand is higher; every producer with the exception of the United Arab Emirates and Saudi Arabia is producing less today than they were in January of 2020."
He added, "This is a real shortage," and he said the latest U.S. emergency supply release "is insufficient to be able to deal with the scale of the problem."
In other oil-related news on Wednesday, the Canada federal government approved a $12 billion offshore oil project proposed by Norway's Equinor; the Bay du Nord project consists of multiple oil discoveries containing at least 300 million recoverable barrels and could produce as much as 200,000 barrels per day when it goes into operation.
Ottawa stated that technical improvements such as installing carbon capture technology can allow Canada to meet its emission reduction targets while still allowing increased oil production.
