Oil prices tumble on reports U.S. will release reserves, as OPEC+ sticks with planned output boost

The release of crude oil could help the market rebalance in 2022, and cut back on the amount of demand destruction needed, said a team of commodity analysts at Goldman Sachs led by Damien Courvalin, in a note on Thursday.

However, that extra oil “would not resolve the structural supply deficit, years in the making. In fact, lower prices in 2022 would support oil demand while slowing the acceleration in shale production, leaving for now a deficit in 2023 as well as the likely requirement to refill the SPR,” said Goldman analysts.

Among the bullish risks, they see potential logistical bottlenecks to any U.S. SPR release, such as congestion on the Gulf Coast that might slow shale production. Also OPEC+ may not accelerate its planned quota increase to compensate for falling Russia and Kazakhstan exports. For 2023, Goldman sees prices $5 above the $110 a barrel forecast, while this year could see prices back to $125 per barrel in the second half.

Indeed, OPEC+ held the line in its Thursday meeting, rubber-stamping a previously agreed plan that will lift its production target by 432,000 barrels a day in May. OPEC+ has resisted calls by the Biden administration and other energy-consuming countries to more rapidly boost output.

Elsewhere, Russia is reportedly offering hefty discounts of its oil to India, amid sagging demand due to those sanctions, Bloomberg reported on Thursday, citing sources.

See also: War in Ukraine: Heavy fighting rages near Kyiv as Russia appears to regroup

Supply data

The U.S. Energy Information Administration reported on Thursday that domestic natural-gas supplies climbed by 26 billion cubic feet for the week ended March 25. That matched the average weekly climb forecast by analysts surveyed by S&P Global Commodity Insights.

On Wednesday, the EIA reported a 3.4 million-barrel fall in last week’s U.S. crude inventories, but also showed increases in gasoline and distillate stockpiles.