Picture: REUTERS/NICK OXFORD
Picture: REUTERS/NICK OXFORD

London — Oil prices dropped by more than 1% on Tuesday ahead of the expected release of US crude reserves to cool the market while resurgent Covid-19 cases in Europe also weighed on demand.

The US’s planned release of emergency oil reserves is part of a plan that President Joe Biden’s administration has hashed out with China, India and Japan to lower energy prices.

Brent crude futures fell 69c, or 0.87%, to $79.01 a barrel by 9.38am GMT and US West Texas Intermediate (WTI) crude futures were down 98c, or 1.28%, at $75.77.

“US President Biden is said to be preparing to announce a release of oil from its strategic petroleum reserve in concert with several other countries,” ANZ said in a note.

The Opec+ cartel has so far rebuffed repeated requests by Washington to pump more oil. On Monday prices rose more than 1% on reports that the group could adjust planned increases to output if large-consuming countries released crude from reserves or if the pandemic dampened demand.

Prices have dropped below $80 a barrel from a three-year high of more than $86 on October 25 amid talks of a co-ordinated release and a potential hit to energy demand from a fourth wave of Covid-19 cases in Europe.

A release from reserves is expected to have only a temporary effect on prices, analysts have said.

“As Europe, and in particular Eastern Europe, struggles to halt the spread of Covid-19, the risk of lockdown-like measures looms large,” said Rystad Energy analyst Louise Dickson.

She said demand in November for road and jet fuel in Europe is expected to fall to 7.8 million barrels per day (bpd) from 8.1-million bpd in October, though part of that is a normal decline for this time of year.

“If a new wave of lockdowns are enacted in Europe, oil prices will not be spared during the remainder of the flu season in the northern hemisphere,” Dickson said in emailed comments.

Reuters

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