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Oil shares dip as Asian nations consider releasing oil reserves

Oil shares dip as Asian nations consider releasing oil reserves
Oil shares dip as Asian nations consider releasing oil reserves   -   Copyright  Thomson Reuters 2021
By Reuters

By Danilo Masoni

MILAN – Shares in oil companies fell on Thursday as plans by the world’s top consuming nations to release strategic reserves sent crude prices to multi-week lows, curbing enthusiasm for one of the best performing sectors across equity markets in recent months.

U.S. President Joe Biden’s administration has asked countries including China, India and Japan to consider releasing crude stockpiles in a coordinated effort to lower global energy prices, several people familiar with the matter told Reuters.

China said it was working on a release of its reserves, although it declined to comment on the U.S. request. Other Asian countries were looking into it, though they said they could not release reserves to cool oil prices.

The oil and gas stock index was the biggest sectoral loser in Europe, down 1.5%, eroding part of the stellar gains driven by a rally in oil and gas prices. Despite today’s decline, the index is up around 20% so far this year.

The broader market is up 22% so far this year.

Oil majors Royal Dutch Shell, TotalEnergies and BP – the three largest European majors with a combined market capitalisation of more than $350 billion, were down between 1.5% and 2%.

“After flying with fantasy forecasts of oil reaching $150 over the past few months, we are now coming back down to earth. Oil prices remain a declining asset class and this is a sector where there are fewer investments,” said Michele Pedroni, fund manager at DECALIA in Geneva.

“Even though oil demand remains good.. Today’s news has rung the first alarm bell to start scaling back the rally that we’ve seen over the past few months,” he added.

Shares in big U.S. oil groups, Exxon Mobil, Chevron, and ConocoPhillips were down between 0.1% and 0.3% in pre-market trade, following losses in the previous session when oil producers warned of impending oversupply.

The request by Washington comes at a time when rising energy prices are adding to global inflationary pressures forcing central banks to dial back on pandemic-era stimulus policies.

Crude prices fell on the news.

Brent crude in London declined as much as 1.2% to a six-week low of $79.28 per barrel, while U.S. West Texas Intermediate was 1.6% down at one point at 77.08, also the lowest since early last month. [O/R]

Biden also asked the Federal Trade Commission to investigate possible “illegal conduct” by oil and gas companies, citing mounting evidence of anti-consumer behaviour.