Oil prices drop below $100 on release of strategic reserves and China lockdowns
Crude dropped nearly 4% on Monday, extending weakness to the lowest in over three-weeks, with both contracts holding firmly below psychological $100 level.
The decision of the member nations of the International Energy Agency to release 60 million barrels from their strategic stocks over the next six months, with the United States matching that as a part of its decision to release 180 million barrels, announced last month, eased fears about supply shortages and pushed the oil prices lower.
Oil prices surged to the multi-year highs after the war in Ukraine sparked fears about supply shortages as the US and EU decided to stop importing oil from Russia, due to economic sanctions, imposed immediately after the Russia invaded Ukraine.
The release of strategic reserves which equals 1.3 million barrels per day over the next six months aims to offset a shortfall of 1 million barrels per day in Russian crude supply, as the European Union’s executives are drafting proposals for a possible oil embargo on Russia, though still lacking a unity in implementing the plan.
Another factor that negatively impacts oil prices was the newest wave of coronavirus Omicron variant in China, as authorities applied a zero tolerance and locked Shanghai, the city of 26 million people, raising concerns about the demand from the world’s biggest oil importer.
Technical studies continue to weaken on daily chart, supporting the current drop in oil prices, with important failure swing pattern developing on daily chart.
Price action eyes key supports at $92.64 (WTI) and $96.92 (Brent), break of which would generate stronger bearish signal and open way for further price fall.