On March 24th, declining European banking shares and comments from U.S. Energy Secretary Jennifer Granholm about the slow refilling of the Strategic Petroleum Reserve (SPR) led to a 2.5% drop in oil prices. Brent crude fell to $74.06 a barrel, a decrease of $1.85 or 2.4%, while West Texas Intermediate U.S. crude futures fell to $68.23 a barrel, a decline of $1.79 or 2.5%. Despite falling over 4% earlier in the session, both benchmarks were expected to end the week higher after experiencing their biggest weekly declines in months last week due to concerns over the banking sector and a possible recession.
John Kilduff, partner at Again Capital LLC in New York, remarked, “We are facing macroeconomic headwinds, and there is a new correlation with equities.” Earlier in the day, banking stocks in Europe slid, with Deutsche Bank and UBS Group experiencing significant declines due to concerns that the sector’s problems have not been contained since the 2008 financial crisis. U.S. Treasury Secretary Janet Yellen called an unscheduled meeting of the Financial Stability Oversight Council on Friday morning in response to these concerns. Additionally, a stronger dollar, which increased by 0.6% against other currencies, contributed to the sell-off. The stronger greenback makes crude more expensive for holders of other currencies.
In October, the White House announced plans to repurchase oil for the Strategic Petroleum Reserve (SPR) when prices fell to approximately $67-$72 per barrel. However, U.S. Energy Secretary Jennifer Granholm expressed difficulty in utilizing the current low prices to replenish the SPR, which currently stands at its lowest level since 1983 due to sales directed by President Joe Biden last year. Despite declining oil prices, strong demand projections from China limited the decrease, with Goldman Sachs stating that commodity demand in China, the world’s largest oil importer, was surging, with oil demand exceeding 16 million barrels per day.
According to the RIA Novosti news agency, Russian Deputy Prime Minister Alexander Novak announced that the 500,000 barrels per day (bpd) reduction in Russia’s oil production, previously announced, would be from the February output level of 10.2 million bpd. Novak stated that this would result in Russia aiming to produce 9.7 million bpd between March and June, which is a significantly smaller output cut than what was previously indicated by Moscow.
Heating Oil News
