Oil prices have fallen 2% since the beginning of the week and will continue to fall amid a decline in global demand

The US government announced plans to increase crude oil released from the Strategic Petroleum Reserve (SPR) to curb oil prices, which rose 2% following Russia's decision to cut oil production by 500,000 barrels per day starting in March. This was a response to the ban on the supply of Russian oil products introduced by Europe on February 5.

The US plans to sell 26 million barrels of oil from the strategic oil reserve between April and June of this year. The volume of US oil reserves will fall from 371.5 million barrels to 345 million barrels, which will be the lowest level since 1983. The total capacity of oil storages is 714 million barrels.

Over the past year, Russian oil production has remained steady at about 10.7 million barrels per day, despite an embargo imposed by the European Union on Russian crude oil shipped by sea in December 2022. Total oil production in Russia approached 11 million barrels per day thanks to increased supplies to China and India.

Amid the EU's decision to cap oil prices with Russia, Brent crude futures fell 2% to $84.8 a barrel early in the week, fully offsetting gains after Russia's announcement. However, the quotations are still at the level of 4.7% higher than two weeks ago.

According to the OPEC report, in January the discount on Urals oil exported by Russia increased by $2.5 and reached $30 per barrel. On the European market, the price of Urals continued to fall after the introduction of sanctions against Russian oil by the European Union and the G7. At the same time, according to the Ministry of Finance of Russia, the price of Urals in January 2023 was $49.48 per barrel, which is lower than in December ($50.47 per barrel) and in January-December 2022 ($76.09 per barrel). Oil production decreased to 9.7 million barrels per day in January. As a result, in January alone, Russia lost $8 billion due to sanctions and oil price restrictions. This led to a reduction of the country's oil and gas revenues by about a third, an increase in the budget deficit and a limitation of the ability to spend money on military purposes.

In the US, the prices of consumer goods have increased in the last two months, without decreasing as previously predicted. This increases the risk of a further increase in inflation in the coming months. Traders are preparing for more stringent measures from the Federal Reserve System and a new wave of selling of risky assets, including oil.

However, supply concerns eased after the Energy Information Administration said it expected record production in March from the seven largest US shale basins. Crude oil exports have resumed at a key Turkish port after a devastating earthquake struck the region.

The IMF predicts that world oil prices will fall by 16.2% in 2023 and by another 7.1% in 2024. The average price of Brent, Dubai Fateh and West Texas Intermediate will be $81.13 and $75.36 per barrel, respectively.

In addition, the IMF expects non-energy commodities to depreciate by 6.3% in 2023 and 0.4% in 2024. This decline in oil prices will put pressure on the prices of energy GHG crops such as palm oil, canola and corn, especially against the backdrop of balanced global balance sheets this season.