Oil prices fell sharply on Friday amid declining European banking shares and after U.S. Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve (SPR) may take several years, dampening demand prospects. Brent crude fell $2.50, or 3.3%, to $73.41 a barrel by 1031 GMT, while West Texas Intermediate U.S. crude futures dived $2.47, 3.5%, to $67.49 a barrel.
European Banking Shares Decline Contributed to the Fall
One of the significant contributors to the fall in oil prices was the decline of European banking shares. The drop in shares came after the news of money laundering allegations that caused the shares of banks like HSBC, Standard Chartered, and Deutsche Bank to slide. The decrease in banking shares added to the economic worries, leading investors to worry about the recovery of the European economy from the pandemic. Consequently, the concerns over the weak economic recovery had a direct impact on the oil prices, leading to a fall.
Refilling of Strategic Petroleum Reserve Might Take Several Years
The second reason that contributed to the drop in oil prices was the statement made by the US Energy Secretary Jennifer Granholm. She stated that refilling the Strategic Petroleum Reserve may take several years, leading to dampening demand prospects. The SPR is a critical component of the US energy policy, which is used to maintain the country’s energy security in times of crisis. The US government uses this reserve to maintain a balance in the oil market and stabilize prices.
However, Granholm’s statement, indicating the refill process may take several years, made investors anxious, leading to a decrease in oil demand prospects. It is essential to note that the SPR’s supply is limited, and the delay in refilling it may have a long-term impact on the global oil market.
Brent and WTI Crude Oil Prices Dropped Significantly
The decrease in European banking shares and the statement by the US Energy Secretary led to the significant drop in Brent crude and West Texas Intermediate U.S. crude futures. Brent crude oil dropped by $2.50, a 3.3% decline, to $73.41 a barrel. Similarly, West Texas Intermediate U.S. crude futures decreased by $2.47, a 3.5% decline, to $67.49 a barrel.
The fall in oil prices had a significant impact on the oil-producing countries’ economies, especially those who rely heavily on oil export. It is also worth mentioning that the fall in oil prices led to a decrease in the value of energy companies, leading to significant losses in the stock markets.
The decrease in European banking shares and the statement made by the US Energy Secretary had a significant impact on the global oil market. The fall in oil prices led to concerns over the economic recovery and the stability of the global oil market. It is essential to note that the delay in refilling the Strategic Petroleum Reserve may have a long-term impact on the oil market. Therefore, it is vital for policymakers to take measures to stabilize the oil market and ensure its stability in times of crisis.