(Bloomberg) — Oil headed for a back-to-back weekly retreat on plans for massive stockpile releases, a demand-sapping virus outbreak in top importer China and a hawkish turn from the U.S. Federal Reserve.
West Texas Intermediate traded below $97 a barrel, with prices about 3% lower this week. The recent drop means the U.S. benchmark has now lost the bulk of the gains seen since Russia’s invasion of Ukraine began in late February.
Alarmed by the surge in energy costs spurred by Moscow’s assault, Washington and allies have announced plans to sell almost a quarter-of-a-billion barrels from strategic petroleum reserves. With the move supported by France, the U.K. and others, that’s prompted a collapse in once-elevated time spreads.
Crude prices — which remain almost 30% higher year-to-date — have also been hurt this month as China ordered a series of lockdowns in key urban centers including Shanghai to quell a coronavirus outbreak. At the same time, plans by the Fed for an aggressive tightening of U.S. monetary policy to combat inflation have blunted demand for risk assets and boosted the dollar.
While many western companies are shunning Russian oil following the invasion, there are plenty of willing takers in Asia, especially in China and India. Cargoes of Russian Sokol crude from the Far East have sold out for next month.
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