Oil prices slid below $100 a barrel recently as the market contended with rapidly decreasing demand in China and numerous countries' pending release of strategic petroleum stocks.
The dip below $100 was broken Tuesday morning, however, with West Texas Intermediate (WTI) Crude
Pandemic-related disruptions are again wracking the energy market as China's "Zero COVID" policy drives down demand. Residents of locked down cities such as Shanghai are essentially confined to their homes, keeping many workers at home, reducing energy consumption by businesses and gas usage by commuters. Even when restrictions are eased, some experts have predicted an ongoing shortfall in Chinese oil consumption.
The drop in Chinese energy demand coincides with a coordinated release of oil from the national stockpiles of International Energy Agency member countries. The release of 120 million barrels, half of which will be taken from the U.S. Strategic Petroleum Reserve, is intended to offset inflated gas prices triggered by Russia's invasion of Ukraine. Since the attack began in February, Russia's share of the global energy market and European dependence on Russian natural gas have caused ongoing market disruptions.
As many experts have pointed out, the release of oil from strategic reserves will help reduce prices in the short term but won't address supply issues currently facing the market. Reduced Chinese consumption similarly on provides a degree of limited relief to consumers. Increased production from OPEC+, announced in March, should give a degree of "longer" short-term relief.
However, a potential blanket ban on Russian oil products by the European Union stands to cause a broader market shortfall. While there has been discussion of using U.S. exports to make up for the shortfall by some, OPEC+ stated that it would not increase production to make up for a Russian ban.
