Oil Prices Sink As US Taps Reserves; Equities Fall

Oil prices tumbled on Thursday after the United States announced it would release a record amount of oil from its stockpiles to fight soaring gas prices sparked by Russia's invasion of Ukraine.

President Joe Biden described the giant release that will see a million barrels of US government oil hit the market every day for six months as a "wartime" measure that will defuse Russia's leverage as an energy power.

West Texas Intermediate dropped seven percent and almost dipped below $100 a barrel after the move, while Brent lost nearly five percent, though analysts did not expect the supply release to stabilize the oil market.

"Sanctions against Russia have distorted supply and though Washington's move to release stored oil has cooled markets, it's only a stop gap," AJ Bell's Hewson said.

Crude prices have spiked in recent weeks over fears of a major supply shortfall after Russia -- the world's second biggest exporter of oil after Saudi Arabia -- invaded Ukraine in late February, sending Brent prices almost to an all-time high earlier this month.

Meanwhile the OPEC+ group of oil-producing countries and its Russia-led allies agreed to another modest oil output increase on Thursday, ignoring Western pressure for a more significant hike.

AJ Bell analyst Danni Hewson said the group could have taken measures to bring Brent prices below $100 a barrel, but "several members (are) steadfastly refusing to engage in global politics, instead insisting balancing oil markets must take precedence."

Stock markets fell after Russia poured cold water on hopes that ceasefire talks with Ukraine were progressing, again raising the prospect of a protracted war.

President Vladimir Putin also warned "unfriendly" countries, including all EU members, that they would be cut off from Russian gas unless they opened an account in rubles to pay for deliveries.

Major Wall Street indices lost around 1.6 percent, ending the worst quarter for equities in two years on a downbeat note.

Edward Moya of OANDA expected markets to remain fragile as the Federal Reserve hikes interest rates to fight record US inflation and the conflict in Ukraine grinds on.

"Wall Street will have a lot to debate over the next few months but a choppy stock market seems likely as no clear answers will be had on when peak inflation happens and how aggressive will the Fed be with tightening until geopolitical risks are resolved," he said in a note.

Energy majors, like Britain's BP, France's TotalEnergies and Exxon Mobil and Chevron of the United States, saw their share prices drop as lower crude prices bit into revenues and profits.

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 percent and 20 percent respectively this year.

London stocks dipped 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.