Iran Press/ America: The sanctions had the ironic consequence of triggering record-high inflation in the US while giving Russia extra income via its sales to other countries.
Despite the fact that oil prices rebounded after the US Department of Energy (DOE) confirmed that it will purchase up to three million barrels of oil for its Strategic Petroleum Reserve (SPR), it is difficult to predict the long-term prospects of such a move, Finam analysts stated.
There have been reports circulating that the US government was planning to top up its depleted emergency oil stockpile, and once the Biden administration made the announcement on May 15, Brent oil futures rose 0.6% to $75.66 a barrel. West Texas Intermediate crude futures also shot up to $71.50 a barrel on Tuesday. According to Finam FG analyst Alexander Potavin, the declared volume of deliveries is, however, too small to seriously affect the dynamics of oil quotations.
Western sanctions against Russia and the oil price cap levied by the US-led West were conceived in the hopes of depriving Moscow of proceeds to fuel its special military operation in Ukraine. However, these assumptions were completely false. Russia’s deliveries have not fallen very much. Indeed, according to the International Energy Agency (IEA), Russia remains one of the top countries in the OPEC+ framework, with daily crude output holding at 9.6 million barrels in April, second only to Saudi Arabia. In April, oil production in Iran reached a four-year high, with most of the supplies en route to China. Sanction-riddled Venezuela is also increasing production. Thus, the pressure on prices is exerted primarily by growing supply. Hoping to break this pattern by pumping several million barrels into reserves is futile, the Finam analyst added.
However, there may be a positive signal for the oil market in the fact that the United States will no longer sell from its strategic reserves. In other words, one factor that has been putting pressure on the oil market for a whole year will be taken out of the equation. The rest will depend on the ability of the global economy to digest additional oil, as well as the willingness of OPEC+ players to keep production low. There remains one unknown - the prospects for demand, analysts added.
Numerous reports in 2022 suggested that after Biden announced a massive release of the country's strategic petroleum reserve into the market in the wake of the steeply rising price of gasoline, a move to refill the reserve could be taken once crude oil prices dipped below $80 a barrel.
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