Oil rises as supply worries persist

London — Oil prices rose on Thursday from a three-week low touched in the previous session after consuming nations announced a huge release of oil from emergency reserves, as worries over tight supplies still clouded the market outlook.

Brent crude futures climbed $1.05, or 1.%, to $102.12 a barrel at 9.21am GMT, while US West Texas Intermediate (WTI) crude futures rose 86c, or 0.9%, to $97.09 a barrel.

Both benchmarks plunged more than 5% in the previous session and hit their lowest closing levels since March 16.

International Energy Agency (IEA) member countries on Wednesday agreed to release 60-million barrels on top of a 180-million barrel release announced by the US last week to help drive down prices amid supply fears following Russia’s invasion of Ukraine.

Japan will release 15-million barrels of oil from state and private reserves as part of the move, Kyodo news agency reported on Thursday.

“Although this is the biggest release since the stockpile was created in 1980, it will fail to ultimately change the fundamentals in the oil market,” ANZ bank said about the US release.

ANZ argued that the release is likely to delay further increases in output from key producers and could give Opec+ more “breathing room amid calls to increase output further”.

Other analysts, however, see the stocks release as a big relief to market tightness concerns.

“In view of these quantities, the previous concerns about tight supplies are no longer justified, as can also be seen from the price trend,” Commerzbank said, noting that Brent prices have plunged by about $12 since the first announcement of a US release came last week.

China’s oil demand is expected to rebound to 14.26-million barrels a day in the second quarter, after dropping to 13.9-million barrels a day in the previous quarter as the country’s zero-Covid policy dampened consumption, a senior researcher from China National Petroleum Corp (CNPC) said.

China, the world’s biggest oil importer, said it will strictly control new capacity in its oil refining industry and will accelerate the elimination of inefficient and outdated production capacity..

Stalled indirect talks between Iran and the US on reviving a 2015 agreement on Tehran’s nuclear programme have further delayed the potential for sanctions on Iranian oil to be lifted, keeping the market tight.

Political decisions are needed in Tehran and Washington to overcome remaining issues, negotiators say.

Reuters