Oil futures suffer biggest weekly percentage decline in nearly 2 years

Price action

• West Texas Intermediate crude for May delivery 
  CL00,
  -0.86%

  CL.1,
  -0.86%

  CLK22,
  -0.86%
  shed $1.01, or 1%, to settle at $99.27 a barrel on the New York Mercantile Exchange, the lowest finish since March 16. Front-month prices closed out the first quarter with a 33% gain and a 4.8% rise for March.

• June Brent crude
  BRN00,
  +0.34%

  BRNK22,
   the global benchmark, lost 32 cents, or 0.3%, to $104.39 a barrel. The expired May Brent had climbed nearly 6.9% for the month and 39% for the quarter.

• May natural gas 
  NGK22,
  +1.42%
  rose 1.4% to $5.72 per million British thermal units, and saw a March rise of more than 28% and quarterly climb of over 51%. For the week, it was up 1.9%.

• May gasoline 
  RBK22,
  +0.06%
  rose nearly 0.1% to $3.154 a gallon and May heating oil 
  HOK22,
  +3.54%
  rose 1.9% to $3.424 a gallon. Both lost m ore than 8% for the week.

Market drivers

Oil prices extended their loss from Thursday, when President Joe Biden authorized the release of 1 million barrels of oil per day for the next six months from the U.S. Strategic Petroleum Reserve.

The move could keep a lid on prices in the near term, analysts said, but they see it as only a temporary fix for tight global supplies, especially as the war in Ukraine grinds on.

Read: What Biden’s historic decision to release oil reserves means for the market

The U.S. SPR release “cannot balance the market and offset the structural supply issue the global market is facing,” Troy Vincent, senior market analyst at DTN, told MarketWatch, noting that the market expects a supply loss of over 2 million barrels per day from Russia alone in the coming weeks.

Members of the International Energy Agency, which includes the U.S., most of Europe, Canada, Mexico, Japan and South Korea, said Friday that they’ve also agreed to release oil from their emergency reserves, to join the U.S. move. The IEA plans to release details on the release early next week.

But a volatile week left crude, on a front-month contract basis, with bruising weekly drops of 12.8% for U.S. benchmark WTI and 11.1% for Brent, according to Dow Jones Market Data. Both saw their biggest weekly percentage declines since late April 2020.

Geopolitical headlines continued to attract attention on Friday after Russia accused Ukraine forces of an attack on an oil facility just north of the border between the two countries. Peace talks between the two sides continued by videoconferencing despite fighting on the ground.

War in Ukraine: Talks set to resume between negotiators as eastern Ukraine braces for more Russian attacks

Thursday also saw an OPEC+ meeting that rubber-stamped a previously agreed plan that will lift its production target by 432,000 barrels a day in May.

“OPEC+ continues to snub calls from the U.S. and other Western powers to raise output to quell the tight market conditions,” analysts at Sevens Report Research wrote in Friday’s newsletter. The group is remaining “very disciplined in this high price environment” and that adds a tailwind for the months and quarters ahead.

“Bottom line, once a cease-fire is finally agreed upon between Russia and Ukraine, expect a sell-the-news reaction, though the long-term trend does still remain decidedly bullish right now,” they said.

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