Oil prices sink as US considers tapping reserves to combat supply crisis

LONDON — Oil prices tumbled on Thursday on reports that the United States is considering tapping reserves to combat a supply crisis sparked by the Ukraine war.

London's Brent crude and New York's WTI both dived around six per cent, also ahead of an output decision from the Organisation of the Petroleum Exporting Countries and fellow oil producers, including Russia.

Equities struggled to build on the week's rally after Russia poured cold water on hopes that ceasefire talks with Ukraine were progressing, leaving the prospect of a protracted war.

Energy majors, like Britain's BP and France's TotalEnergies, saw their share prices drop as lower crude prices bites into revenues and profits.

"Oil prices are under considerable pressure... on news that the US government is planning a massive release of oil," said Commerzbank analyst Carsten Fritsch.

US President Joe Biden is reportedly looking at releasing a million barrels a day for several months — totalling up to 180 million — as he tries to temper a conflict-fuelled price surge.

The Ukraine war has already sent shockwaves through the world economy, with growth forecasts this year being lowered across the board.

The European development bank, EBRD, forecast gross domestic product in Russia and Ukraine would shrink 10 per cent and 20 per cent respectively this year.

London stocks dipped on Thursday as data showed that the UK economy rebounded slightly less than initially thought last year and ahead of a far tougher 2022 on fallout from the Ukraine war and rampant inflation.

Asian equities fell on Thursday after three days of healthy gains and following comments from Russian officials playing down progress in talks with Ukraine over the ceasefire.

Adding to selling pressure was data showing signs of a further slowdown in China's manufacturing sector caused by COVID lockdowns around the country, including in Shanghai.