Oil prices gain about 5% over volatility driven by unrest in Kazakhstan, US crude sale from emergency stocks
The price of Brent surpassed $85 a barrel on Friday as the US dollar headed for one of its largest weekly falls in more than a year, whetting investor appetite for dollar-indexed oil.
International benchmark Brent crude was trading at $85.29 per barrel at 1149GMT for a 0.97% increase after closing the previous session at $84.47 a barrel.
American benchmark West Texas Intermediate (WTI) was at $82.86 per barrel at the same time for a gain of 0.9% after trading in the previous session ended at $82.12 a barrel.
The US dollar index, which measures the value of an American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, declined to 94.84 on Friday, posting 0.9% loss for the week.
The decline in the greenback’s value is encouraging for oil-importing countries to purchase more crude at cheaper dollar-denominated prices.
Volatile week for oil markets
The oil market started the week with bearish sentiment amid geopolitical unrest in OPEC member Kazakhstan, and headed for almost 5% gains during the week ending on Jan. 14.
Brent posted a 4.58% gain from the Monday session that opened at $81.76 a barrel, while the WTI increased 5.38% relative to the opening price of $78.88 a barrel on Monday.
On Jan. 2, protests broke out in the country over an increase in liquefied petroleum gas (LPG) prices in the city of Zhanaozen in Mangystau province, later turning into clashes with police, with the most violence occurring in the former capital and largest city Almaty.
The protests also caused interruptions in production at the giant Tengiz oil field in western Kazakhstan. However, the operator Chevron later announced that output began to gradually return to normal levels.
However, the rapid spread of the omicron variant of COVID-19 and related restrictions in some European countries and China, the world’s second largest oil consumer, exerted downward pressure, prompting demand concerns.
China stepped up COVID-19 mitigation measures amid a rise in daily cases, while US crude oil inventories suffered a greater-than-expected decline, providing upward support for prices.
With more than 4,630 deaths from the coronavirus on Thursday, including 190 new infections and 124 cases of domestic transmission, China stepped up restrictions and ordered more than 20 million people in several provinces, including in capital Beijing, to stay at home.
Prices surpassed $84 a barrel after the Energy Information Administration (EIA) announced on Thursday that inventories had fallen by 4.6 million barrels to 413.3 million, exceeding the market expectation of a 1.95 million-barrel drop.
The country’s gasoline inventories, however, increased by 8 million barrels to 240.7 million barrels over that period, indicating weak demand and capping some of the weekly gains.
US efforts to cool off rising oil prices
On Thursday, the US Energy Department announced the sale of 18 million barrels of strategic crude oil reserves to six companies, including Exxon Mobil and a Valero Energy affiliate and Saudi state enterprise refinery Motive.
The move was part of a US-led initiative to release 50 million barrels of oil from the country’s Strategic Petroleum Reserves (SPR), the largest petroleum stockpile in the world used for emergencies. It later led to a coordinated effort with other major energy-consuming nations, including China, India,Japan, South Korea, and the UK to release oil into their respective domestic markets.
US President Joe Biden had repeatedly asked OPEC+ producers to increase the group’s collective output to provide additional market supply and lower crude prices. However, the group did not respond to these demands and agreed to adhere to the production pact of 400,000 barrels per day in December last year and January and February this year.
China had also sold some crude from its SPR on Sept. 24 in an attempt to curtail rising energy prices.