(Reuters)

Oil prices fell about 2.5 per cent today (March 24) amid declining European banking shares and after US Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve (SPR) may take several years, dampening demand prospects.

Brent crude fell US$1.85, or 2.4 per cent, to US$74.06 a barrel by 11:13 am EST (1513 GMT, while West Texas Intermediate US crude futures fell US$1.79, 2.5 per cent, to US$68.23 a barrel.

Both benchmarks, which fell over four per cent earlier in the session, were on track to end the week higher, after posting their biggest weekly declines in months last week due to banking sector turmoil and worries about a possible recession.

“We’re riding along macroeconoic headwinds, and there’s a newfound correlation with equities” said John Kilduff, partner at Again Capital LLC in New York.

YELLEN CONVENES UNSCHEDULED MEETING

Banking stocks slid earlier in the session in Europe with Deutsche Bank and UBS Group hit hard by worries that the worst problems in the sector since the 2008 financial crisis have not yet been contained.

US Treasury Secretary Janet Yellen convened an unscheduled meeting of the Financial Stability Oversight Council on Friday morning.

A stronger dollar, which rose 0.6 per cent against other currencies, also fuelled the sell-off. A stronger greenback makes crude more expensive to holders of other currencies.

The White House said in October it would buy back oil for the SPR when prices were at or below about US$67-US$72 per barrel.

Granholm told lawmakers on Thursday that it would be difficult to take advantage of low prices this year to add to stockpiles, which are currently at their lowest level since 1983 following sales directed by President Joe Biden last year.

Strong demand expectations from China capped decreases, with Goldman Sachs saying commodities demand was surging in China, the world’s biggest oil importer, with oil demand topping 16 million bpd.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said a previously announced cut of 500,000 barrels per day (bpd) in Russia’s oil production would be from an output level of 10.2 million bpd in February, the RIA Novosti news agency reported.

That would mean Russia is aiming to produce 9.7 million bpd between March and June, according to Novak, which would be a much smaller output cut than Moscow previously indicated.