LONDON/NEW YORK: Oil futures edged lower on Wednesday following a surprising rise in U.S. crude stocks and after news that large consuming nations would also release oil from reserves in conjunction with the United States to counter supply worries.
Member states of the International Energy Agency (IEA) will release 120 million barrels from strategic reserves, including 60 million from the United States, according to two sources familiar with the matter. That U.S. 60 million commitment is part of Washington's plans to release a million barrels a day for the next six months for a rough total of 180 million barrels.
Brent crude futures were down 28 cents, or 0.3%, to $106.34 as of 11:06 a.m. EST (1506 GMT). U.S. crude fell 30 cents to $101.65 a barrel.
Crude markets have been through weeks of volatility, with prices surging on supply concerns after Russia's invasion of Ukraine and subsequent sanctions on Moscow by the United States and its allies.
IEA countries to tap 60mn barrels of oil on top of US release
Lately the market has been pulling back following reserve releases along with expectations that demand in China will slip as a resurgent pandemic has prompted lockdowns of cities including Shanghai.
U.S. crude stocks rose by 2.4 million barrels in the latest week, the U.S. Energy Information Administration said, while analysts had expected a drawdown. Output also rose, hitting 11.8 million barrels a day, most since late 2021, and output is expected to continue rising. The United States also released nearly 4 million barrels from its strategic reserve in the week.
"The SPR release was huge which does raise confidence that they can move a lot out of the reserve on a weekly basis," said Phil Flynn, senior analyst at Price Futures Group in Chicago.
The United States and its allies on Wednesday prepared new sanctions on Moscow over civilian killings in northern Ukraine, which President Volodymyr Zelenskiy described as "war crimes." Russia denied targeting civilians.
"These concerns have no doubt fed into the oil price trending higher, with volatility expected to continue as the geopolitical situation unfolds," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
Proposed EU sanctions, which the bloc's 27 member states must approve, would ban buying Russian coal and prevent Russian ships from entering EU ports.
US crude stocks increase, output hits COVID-era high: EIA
The head of the EU's executive Ursula von der Leyen said the bloc was working on additional sanctions, including on oil imports.
Britain also urged G7 and NATO nations to agree a timetable to phase out oil and gas imports from Russia.
Demand worries also mounted after authorities in top oil importer China extended a lockdown in Shanghai to cover all of the financial centre's 26 million people.