Could Petroleum Reserve Releases Backfire?
April 11, 2022
US crude oil inventories are 14% below the five-year average, gasoline inventories are 1% below the five-year average, distillates are 15% below the five-year average, and propane inventories are 21% below the five-year average.
The US oil rig count was up 13 to a total of 546 oil rigs and last year at this time there were 337 oil rigs online.
Friday, Barclay’s increased its oil price forecast by $7 to 8$ per barrel, saying the recently announced releases from SPRs cannot be a sustainable source of supplies and will not have a lasting effect on prices. It said, “Unless market expectations for underlying demand and supply change materially, an SPR release would likely be a headwind for prices at the front of the curve and a tailwind further out the curve.” The bank forecast Brent crude prices at $100 per barrel for 2022 and US WTI crude oil at $96 per barrel. Barclays cut its 2022 demand growth forecast by 550,000 BPD, citing the implications of a slowdown in Russia, COVIV-related mobility restrictions in China, and higher food and energy cost on consumer spending.
Phil Flynn, an analyst at Price Futures Group said, “There’s some concern that by artificially lowering prices, you are only going to increase demand and that’s going to burn off that supply pretty quickly.”
Energy prices are down to start this week as the news of SPR releases, COVID lockdowns, which could slow China’s demand, and Russia’s economy also slowing down due to sanctions continue to weigh on prices.