Business Maverick: Oil Sheds Bulk of Invasion-Driven Gains

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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 hovered around $97, with prices about 2.3% lower this week. The recent drop means the U.S. benchmark has now lost most of the gains seen since Russia invaded Ukraine 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.

Measured global stockpile releases can be used “as an opportunity to sanction Russian crude oil explicitly by the EU, U.S., Japan, and South Korea, without blowing up the oil price, thus leading to actual economic pain for Russia,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. Flooding the market with releases to crash the price “is, of course, another option, though a very unpredictable one,” he said.

Oil markets remain in backwardation — a bullish pattern marked by near-term prices above longer-dated ones — but differentials have collapsed. Brent’s prompt spread, the difference between its two nearest contracts, has plunged to 57 cents a barrel in backwardation from more than $3 two weeks ago.shows no sign of abating, disrupting Asia’s largest economy. Cities are facing severe restrictions, which are curbing mobility and energy consumption.

 

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