LONDON (Portal) – Oil prices fell on Friday amid falling European bank stocks and after US Energy Secretary Jennifer Granholm said replenishing the country’s Strategic Petroleum Reserve (SPR) could take several years, dampening demand prospects.
Brent crude was down $2.50, or 3.3%, to $73.41 a barrel by 1031 GMT, while US West Texas Intermediate crude futures were down $2.47, or 3.5%, to 67.49 $ per barrel fell.
Both benchmarks, which fell about 1% on Thursday, were on course to end the week slightly higher after posting their biggest weekly declines in months last week amid turmoil in the banking sector and fears of a possible recession.
Banking stocks slid in Europe, with Deutsche Bank and UBS Group hit hard by concerns that the industry’s worst troubles since the 2008 financial crisis have not yet been contained.
A stronger dollar, gaining 0.6% against other currencies on Friday, also fueled the sell-off. A stronger greenback makes crude oil more expensive for holders of other currencies.
“The lack of crude oil purchases for the SPR is a major blow to the oil demand outlook,” said Stephen Brennock, analyst at PVM Oil.
“If anything, it will put even more pressure on China to do the hard work on the demand side in the coming months,” he added.
The White House said in October it would buy back oil for the SPR if prices were at or below about $67 to $72 a barrel.
Granholm told lawmakers it would be difficult to take advantage of low prices this year to replenish inventories, which are currently at their lowest since 1983 after President Joe Biden made sales last year.
Strong demand expectations from China capped the decline, with Goldman Sachs saying commodity demand in China, the world’s largest oil importer, rose sharply with oil demand exceeding 16 million barrels a day.
Meanwhile, Russian Deputy Prime Minister Alexander Novak said a previously announced cut in Russian oil production would come by 500,000 barrels per day (bpd) from production levels of 10.2 million bpd in February, RIA Novosti news agency reported.
That would mean Russia is targeting production of 9.7 million bpd between March and June, according to Novak, which would be a much smaller production cut than Moscow previously stated.
Additional reporting by Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Jason Neely
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