Market Wire - US, IEA Agree to Release 60 Million Barrels from Oil Stockpiles, Prices Continue to Soar
Karl Schamotta, Chief Market Strategist, firstname.lastname@example.org
The United States and the International Energy Agency have agreed to release 60 million barrels of oil from strategic petroleum stockpiles as officials seek to bring a parabolic rise in prices under control. A statement from the US Energy Secretary said the “United States and 30 other member countries, supported by the European Commission, agreed to collectively release an initial 60 million barrels of oil from strategic petroleum reserves. This decision reflects our common commitment to address significant market and supply disruptions related to President Putin’s war on Ukraine. In line with this decision, President Biden authorized me to make an initial commitment on behalf of the United States of 30 million barrels of oil to be released from the Strategic Petroleum Reserve. We stand prepared to take additional measures if conditions warrant”.
“We will continue advancing ongoing efforts to accelerate Europe’s diversification of energy supplies away from Russia and to secure the world from Putin’s attempts to weaponize energy supplies.”
Investors are increasingly convinced that Russia’s output will be taken offline, despite energy-related carveouts in Western financial sanctions, and prices continued to soar through the announcement, with West Texas Intermediate up more than 10 percent to $105, and barrels of Brent trading trading hands for more than $107. The spread between Brent for immediate delivery and delivery in six months has blown out to a record $15.60 a barrel, suggesting that oil consumers are desperate to lock up promptly-delivered supplies.
Russia currently produces roughly 5 million barrels a day, meaning that the release is unlikely to provide much relief to global markets.
Tomorrow’s OPEC+ meeting isn’t expected to move the needle, with unconfirmed reports suggesting that member nations will continue increasing output by 400,000 barrels a day each month.
The Canadian dollar remains under pressure, despite exchange rate-adjusted prices for Western Canada Select nearing $115 a barrel.
From a broader perspective, the global economy looks increasingly likely to suffer something similar to a 70’s-style oil shock, with negative consequences for consumer consumption and overall activity. Market participants are rushing to lower forecasts for tighter monetary policy, and inflation expectations are moving up rapidly - particularly for the next two years. Bell-bottoms may be next…