Oil extends losses due to release of reserves and truce in Yemen

Brent crude oil futures fell 79 cents, or 0.8%, to $103.60 a barrel 0037 GMT, while U.S. West Texas Intermediate crude oil was down $98.45 a barrel. 82 cents, or 0.8%. Both contracts lost $1 when trading opened on Monday.

The United Nations has brokered a two-month truce between a Saudi-led coalition and the Iran-aligned Houthi group for the first time in the seven-year conflict. Saudi oil installations have come under attack from the Houthis during the conflict, adding to the disruption of supplies from Russia.

“It was a supply threat, and a ceasefire would reduce that supply threat,” said Price Futures Group analyst Phil Flynn.

Production of oil and gas condensates from the world’s second-largest exporter fell to 11.01 million barrels per day (bpd) in March, from an average production of 11.08 million bpd in February, according to industry sources. Russian oil refining and exports have been hit by Western sanctions and buyer aversion following Russia’s invasion of Ukraine. Estimates of the loss of Russian oil supply range from 1 million to 3 million bpd.

Oil prices fell about 13% last week after US President Joe Biden announced that up to 1 million bpd of oil will be sold from the US Strategic Petroleum Reserve (SPR) for six months from may. Biden said the release, the third in the last six months, will serve as a bridge until domestic producers can ramp up production and bring supply back into balance with demand.

The US Department of Energy officially announced a sale of oil from emergency reserves, while members of the International Energy Agency also agreed to release more oil on Friday.

“Joint initiatives by the United States and its allies may temporarily balance supply shortfalls in 2022, but that may not be a long-term solution,” Tina Teng, market analyst at CMC Markets APAC, said in a statement. & Canada.

“Additionally, US oil producers may be reluctant to increase production in order to maintain high profits.”

Despite Mr Biden’s calls for US energy companies to increase production, rig count growth remains slow as drillers continue to return money to shareholders thanks to high crude prices rather than to increase production.

Concerns about demand in China, the world’s top oil importer, persist as its most populous city, Shanghai, has extended COVID-19 shutdowns.

China’s transport minister expects a 20 percent drop in road traffic and a 55 percent drop in flights during the three-day Qingming holiday due to an upsurge in COVID-19 cases in the country.

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