Oil prices extended losses on Friday on worries about a potential oversupply after U.S. Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve (SPR) may take several years.
U.S. West Texas Intermediate crude futures slipped $1.65, or 2.38%, to $67.71 a barrel.
Bothenchmarks, which fell about 1% on Thursday, were still on track for a weekly gain of about 3%-4%, recovering from their biggest weekly declines in months last week due to the banking sector crisis and worries about a possible recession.
“There is a sell-off from the view that the United States will not refill oil reserve even if the WTI prices are at $67-$72 a barrel,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
The White House said in October it would buy back oil for the SPR when prices were at or below about $67-$72 per barrel.
Granholm told lawmakers that it would be difficult to take advantage of the low prices this year to add to stockpiles, which are currently at their lowest level since 1983 following sales directed by President Joe Biden last year.
Nissan Securities’ Kikukawa said continued crude supply from Russia to the global market was also weighing on oil which, together with a lingering anxiety about the banking sector, could push benchmarks to test their lows hit earlier this week.
Russian Deputy Prime Minister Alexander Novak said a previously announced cut of 500,000 barrels per day (bpd) in Russia’s oil production would be from an output level of 10.2 million bpd in February, the RIA Novosti news agency reported.
That would mean Russia is aiming to produce 9.7 million bpd between March and June, when the production cut will be in force, according to Novak – a much smaller reduction in output than Moscow previously indicated.
The oil price downside was, however, cushioned by strong demand expectations from China, with Goldman Sachs saying commodities demand was surging in China, the world’s biggest oil importer, with oil demand topping 16 million bpd.
The bank forecast Brent would reach $97 a barrel in the second quarter of 2024.
A more than 1% decline in the dollar in the past week, which makes commodities priced in the greenback cheaper for holders of other currencies, capped downside price pressures.