Crude prices tumble on reports US will release more oil reserves

Crude prices fell sharply on reports that the White House was on the verge of announcing another release of US emergency oil stocks to combat inflation, while Asian equities fell following the latest signs of a slowdown in China’s economy.

West Texas Intermediate, the US oil marker, fell 4.7 per cent to $102.75 a barrel, and international benchmark Brent crude dropped 3.7 per cent to $109.30 following reports that President Joe Biden’s administration was expected to announce its third big release of oil reserves since November.

Oil prices have risen almost 40 per cent in 2022, spurred higher by Russia’s invasion of Ukraine. Biden has increasingly pinned the blame for high inflation in the US on Russian president Vladimir Putin. The International Energy Agency has warned that sanctions on Russia, a big energy exporter, could result in a reduction of 3 per cent of global oil output by April.

Analysts said the impact of any release of US oil reserves might prove limited and that markets would be looking to Thursday’s meeting of Opec+ oil-producing nations for signs of a more substantial boost to global output.

“Over the last 12 months, the US has released a net 66mn barrels of crude,” said Robert Rennie, head of global market strategy at Westpac. “It doesn’t really feel as if those releases to date have had much of an impact.”

Concerns over slowing demand from China, which is enforcing lockdowns in response to an outbreak of coronavirus infections, have also weighed on oil prices.

On Thursday, stock markets across Asia were lower after Chinese purchasing managers’ indices tumbled into contraction territory, with both manufacturing and non-manufacturing PMIs falling more than expected.

Hong Kong’s benchmark Hang Seng index fell 0.7 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was down 0.3 per cent. Japan’s Topix shed 0.3 per cent.

A statement from China’s statistics bureau blamed the contraction on disruptions to supply chains and staffing shortages caused by lockdowns imposed across China in recent weeks to curb outbreaks of Covid-19.

Julian Evans-Pritchard, senior China economist at Capital Economics, said the latest readings “probably understate the hit to activity last month”, adding that “even if the outbreak is brought under control soon, it will still take a while for the economy to get back on track”.

Stock futures pointed to slight gains for European markets on Thursday, with the Euro Stoxx 50 set to rise 0.6 per cent and the S&P 500 expected to gain 0.3 per cent.

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