Oil slides 2% as U.S., allies consider releasing more oil

Crude prices slide 2% on Thursday as the United States and its allies discussed a possible further coordinated release of oil from storage to help calm energy markets roiled by Russia’s invasion of Ukraine. Brent futures fell $2.63, or 2.2%, to $118.97 a barrel. U.S. West Texas Intermediate crude fell $2.26, or 2.0%, to $112.67. “With respect to the emergency stockpiles, these are ongoing discussions and all those tools are certainly on the table,” U.S. Energy Secretary Jennifer Granholm said during a news conference at the International Energy Agency (IEA) in Paris. IEA Executive Director Fatih Birol said IEA countries were united in seeking to radically reduce Russian oil and gas imports.

Prices fell more after ICE said it has increased the margins for May Brent crude futures by 19% effective March 25. Officials at the Organization of the Petroleum Exporting Countries (OPEC) said they believe a possible European Union (EU) ban on oil from OPEC+ partner Russia would hurt consumers. Also weighing on crude prices, the dollar strengthened for the fourth time in five sessions, as U.S. labor market data fed views the Federal Reserve will get more aggressive in fighting inflation. A stronger dollar makes oil more expensive for holders of other currencies. Trading was volatile. Both crude benchmarks rose early in the session to two-week highs on lingering supply concerns including reports that crude exports from Kazakhstan’s Caspian Pipeline Consortium (CPC) terminal had completely halted following storm damage.

Oil storage tanks at the Russian port of Novorossiisk on the Black Sea, which receives Kazakh crude from CPC, will hit full capacity in less than 24 hours, traders said. Western leaders meeting in Brussels agreed to strengthen their forces in Eastern Europe, increase military aid to Ukraine and tighten sanctions on Russia as Moscow’s assault on its neighbor entered its second month. Commerzbank analyst Carsten Fritsch said sanctions were unlikely to have a major impact on the oil market because they “will probably not include an oil embargo by the EU, as a number of countries that are heavily depend on Russian oil — such as Germany — have opposed this.”

Crude prices drew some support from the drop in U.S. crude in the Strategic Petroleum Reserve (SPR), which fell to the lowest level since May 2002. In addition, U.S. crude at the Cushing storage hub in Oklahoma fell in the week to March 22, traders said, referring to a report from data provider Genscape. U.S. government data has shown stockpiles there rising for the past two weeks. Adding to supply concerns, slow progress in talks between world powers and Iran over Tehran’s nuclear work means prospects for Iranian crude returning to the market have been pushed back. Analysts said an agreement with Iran could add another 1 million barrels per day (bpd) of oil supply, but noted that would not be enough to offset declining supply from Russia.