Oil extends drop as investors assess reserve release, Covid wave

Oil extended declines after four weeks of losses as investors assessed the prospect of key consumers adding emergency supply to the market and rising Covid-19 cases across Europe.

Futures in New York dropped toward $75 a barrel in early Asian trading after slumping almost 6 per cent last week. Japan joined China and the US in considering releasing its strategic oil stockpiles to tame a surge in energy prices that’s triggered a jump in inflation.

Lockdowns are returning in Europe as nations enact strict measures to reverse the latest wave.

Oil rallied to the highest level since 2014 in October but has faltered over the past month, even as OPEC+ stuck with its cautious approach to boosting output. The drop in crude in recent weeks signals the release of strategic reserves is already priced into the market, Goldman Sachs Group said last week.

Japan and the US may make a joint announcement on the release of oil reserves as soon as this week, according to the Yomiuri newspaper. Prime Minister Fumio Kishida said on Saturday that the government was reviewing what steps it could take to tackle the issue in coordination with others.

In Europe, countries including Germany, the Czech Republic and Greece are clamping down on the unvaccinated as health services are pushed to the limit. Violent demonstrations broke out in Rotterdam on Friday over the Netherlands’ virus restrictions, while Austria will start a nationwide lockdown on Monday.