By Adedapo Adesanya
Crude prices dropped more than one per cent on Wednesday as the United States Energy Information Administration (EIA) reported an increase of 8.5 million barrels in stockpiles last week.
Brent crude lost 1.17 per cent or $1.26 to sell at $106.30 per barrel while the US West Texas Intermediate (WTI) depreciated by 1.14 per cent or $1.21 to trade at $104.50 per barrel.
US crude stocks, according to the EIA, rose due to another large release from strategic reserves compared with an inventory build of 1.3 million barrels estimated for the previous week, which provided a brief relief for prices.
Commercial crude inventories have been growing as the White House has elected to flood the market with oil to offset the rise in prices.
This offset other bullish news like supply concerns as flows of Russian gas to Europe fell and the European Union (EU) worked on gaining support for a Russian oil embargo.
Russian gas flows to Europe via Ukraine fell by 25 per cent after Ukraine halted the use of a major transit route, blaming interference by occupying Russian forces. It was the first time exports via Ukraine have been disrupted since the invasion.
Russia’s state-controlled energy giant Gazprom, which has a monopoly on the country’s gas exports by pipeline, said it was still shipping gas to Europe via Ukraine, but volumes were seen at 72 million cubic meters on May 11, down from 95.8 million cubic meters the previous day.
The EU is scrambling to reduce its reliance on Russian energy supplies, but it has stopped short so far from imposing sanctions on crucial gas flows.
The European bloc had proposed an embargo on Russian oil, which analysts say would further tighten the market and shift trade flows.
The EU Commission has delayed acting on the proposal as it will need all the approval of the 27 members before it can fully implement that plan but Hungary has dug in its heels in opposition.
This is happening even as the commission plans to offer Hungary and two other nations that have so far objected to the embargo more money to upgrade oil infrastructure.
Oil was supported by hopes of Chinese economic stimulus after China’s factory-gate inflation eased and investors took comfort in signs of lower domestic COVID-19 infections.
Chinese adherence to a zero-COVID strategy, as many other countries loosen restrictions and try to live with the virus, is exacting a growing economic and human cost. Increasingly extreme measures have been required to bring outbreaks under control because the omicron variant spreads so easily.
Modupe Gbadeyanka