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Brent crude for June delivery was down $3.93, or 3.8%, at $98.85
a barrel by 1130 GMT. U.S. West Texas Intermediate crude lost
$4.19, or 4.3%, to $94.07.
Bank of America maintained its forecast for Brent crude to
average $102 a barrel for 2022-23, but it cut its summer spike
price to $120. Swiss investment bank UBS also lowered its June
Brent forecast by $10 to $115 a barrel.
"The release of strategic government oil reserves should ease
some market tightness over the coming months, reducing the need
for oil prices to rise to trigger near-term demand destruction,"
said UBS analyst Giovanni Staunovo.
International Energy Agency (IEA) member nations will release 60
million barrels over the next six months, with the United States
matching that as part of its 180 million barrel release
announced in March.
The moves are aimed at offsetting a shortfall in Russian crude
after Moscow was hit with heavy sanctions over its invasion of
Ukraine, which Moscow describes as a "special military
operation".
The release of Strategic Petroleum Reserve (SPR) volumes equals
1.3 million barrels per day (bpd) over the next six months and
is enough to offset a shortfall of 1 million bpd of Russian oil
supply, JP Morgan analysts said.
The European Union's executive is drafting proposals for a
possible EU oil embargo on Russia, the foreign ministers of
Ireland, Lithuania and the Netherlands said on Monday, though
there is still no agreement to ban Russian crude.
The market has also been watching developments in China, where
authorities have kept Shanghai, a city of 26 million people,
locked down under its "zero tolerance" policy for COVID-19. It
was announced that Shanghai will start easing lockdowns in some
areas from Monday.
"Fears are rising now that if China's Omicron wave spreads to
other cities, its zero-COVID policy will see mass extended
lockdowns that negatively impact both industrial output and
domestic consumption," said OANDA senior market analyst Jeffrey
Halley.
UBS analyst Staunovo said that demand for oil will be affected
in China - the world's biggest oil importer - by pandemic-driven
mobility restrictions and in Russia by international sanctions.
Fuel demand in India, the world's third-biggest oil importer and
consumer, rose to a three-year high in March, with petrol sales
hitting a record peak.
U.S. President Joe Biden will hold a virtual meeting with Indian
Prime Minister Narendra Modi on Monday, the White House said, at
a time when the United States has made it clear it does not want
to see an uptick in Russian energy imports by India.
(Reporting by Bozorgmehr Sharafedin in LondonAdditioanl
reporting by Florence Tan and Isabel Kua in Singapore and David
Gaffen in New YorkEditing by David Goodman)
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