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Oil prices dip as U.S. holds off on restocking strategic reserve

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Oil prices fell in Asian trade on Friday, extending losses from the prior session as U.S. officials said it will be difficult to immediately refill the country’s Strategic Petroleum Reserve (SPR), while uncertainty over OPEC production also weighed.

U.S. Energy Secretary Jennifer Granholm said in a congressional hearing that it could take years for the government to refill the SPR, and that it “will be difficult” to take advantage of a current slump in oil prices.

Her comments offset prior signals that the Biden administration will begin restocking the SPR if prices were consistently around $67 to $72 a barrel. Oil prices sank on Thursday following Granholm’s testimony, given that the move points to lesser buying action in the near-term.

Sales by the Biden administration had pushed the SPR to a near 50-year low in 2022. The government is also set to release an additional 26 million barrels from the reserve as part of a congressional mandate.

Brent oil futures fell 0.3% to $75.68 a barrel, while West Texas Intermediate crude futures fell 0.3% to $69.75 a barrel by 22:49 ET (02:49 GMT). Both contracts extended losses from Thursday.

Still, crude prices were set to rise between 3.7% and 5% this week, as they recovered from 15-month lows hit last week as fears of a U.S. and European banking crisis intensified.

These fears continued to weigh on markets, while a middling economic outlook from the Federal Reserve also dented sentiment.

Oil prices logged steep losses this year on concerns that slowing economic growth will chip away at demand, offsetting a recovery in China. Still, the country is expected to see a massive resurgence in oil demand this year, as it reemerges from three years of COVID lockdowns – a view that was recently reiterated by investment bank Goldman Sachs.

U.S., Europe, and other major economies are grappling with high inflation and interest rates, which are expected to weigh heavily on growth this year. The recent collapse of several U.S. banks also underscored the impact of high interest rates on the economy.

Uncertainty over a production cut by the Organization of Petroleum Exporting Countries and allies (OPEC+) also weighed on crude markets.

While some energy ministers called on the cartel to help stabilize crude prices, a Reuters report suggested that the cartel will likely keep production unchanged when it meets in early-April.

OPEC+ member Russia also said that it will cut production by a smaller margin than initially announced.

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