WTI crude price falls to as low as $75/b, Brent crude breaks below $80/b on Tuesday afternoon, hitting their lowest level since October; as energy traders worry that the new Covid-led lockdowns could slow down the demand growth for petroleum products coupled with the news that the U.S. administration will tap the Strategic Petroleum Reserve.
WTI crude oil contract, Daily chart
Both WTI and Brent have fallen by more than 10% from their multi-year highs, and they are on track for a fifth straight week of losses, which is the longest weekly losing streak since March 2020.
The U.S will release oil from SPR-Strategic Petroleum Reserve:
U.S. President Joe Biden announced today that the administration will release 50 million barrels in total from the Strategic Petroleum Reserve as part of a global coordinated effort with other net importers and energy-consuming nations such as India, China, Japan, Republic of Korea, and the United Kingdom to calm 2021′s rapid rise in gasoline prices.
The administration will sell 18 million barrels and loan the other 32 million barrels (to be returned later), to provide relief on the gas prices and to address the lack of additional supply from the OPEC+ alliance, the higher fuel demand, and the weather-led production disruptions.
The US presidential administration was exploring options to put downward pressure on the surging petroleum prices and especially the gasoline prices at the fuel pump, which climbed to a 7-year high.
One of the options for the administration was to tap the Strategic Petroleum Reserve which was founded in 1975 after the Arab Oil Embargo, with a max capacity of 727 million barrels in store, and the other to convince the OPEC+ alliance to increase the production, which was not accepted from the group.
Crude oil has been under pressure after the surging Covid cases in Europe:
The growth-related crude oil market has been under pressure since last week as investors worry over the impact of surging Covid-19 infections in fuel demand in Europe, which has again become the epicentre of the pandemic, accounting for half of global cases and deaths.
Austria becomes the first country in Europe to reimpose a full Covid-19 lockdown from Monday, its fourth lockdown since the start of the pandemic last year.
The fourth wave of infections has also plunged next-door Germany, Europe’s largest industrial economy, into a national emergency, with local authorities already shutting Christmas markets, bars, cafes, and theatres.
Covid-led lockdowns reduce demand for petroleum products since people aren’t moving around or travelling, businesses and stores are closed.
If the strict measures extend beyond Austria to other parts of Europe or elsewhere, it could be a bearish catalyst for the already inflated WTI and Brent crude oil prices.
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