Oil prices fell by about 5% during trading today, Thursday, after news that the United States intends to free up to 180 million barrels of its strategic oil reserves, which is the largest in the history of the strategic oil reserves of nearly 50 years.
The significant decline in oil prices comes at a time when the markets are awaiting the meeting of the OPEC + alliance, today, Thursday, to approve the production policy during next May, in conjunction with a significant decline in US oil stocks.
Oil Prices Today
Brent crude futures prices – May 2022 delivery, which ends on Thursday – fell by 6%, recording $105.78 a barrel , having fallen earlier by more than 6 dollars.
The prices of West Texas Intermediate crude futures – for delivery in May – also decreased by 5.2%, to reach $102 a barrel, after touching the lowest level at $100.85 earlier.
Oil prices rose about 3% on Wednesday, as peace talks between Ukraine and Russia, which describe their actions as a “special operation”, falter.
Russia is the world’s second largest oil exporter, and Western sanctions imposed as a punishment for the invasion have hampered flows from the country.
US President Joe Biden is due to speak later on Thursday about his administration’s measures to bring down gasoline prices, which have risen to record levels since Russia began its invasion of Ukraine.
Such a statement would help the oil market rebalance in 2022 by increasing supply by 1 million barrels per day for 6 months, Goldman Sachs analysts said in a note.
“However, this will still be a release of oil stocks, not a stable source of supply for the coming years, so this release will not solve the structural supply deficit, which has been for years in the making,” he added.
International Energy Agency
A spokesman for the New Zealand Minister of Energy said today, Thursday, that the member states of the International Energy Agency are scheduled to meet, tomorrow, Friday, at 12:00 pm GMT; To decide on the mass release of oil.
News of the possible US release overshadowed the meeting, scheduled for Thursday, between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.
The group known as OPEC + is expected to abide by its deal to gradually increase oil production, estimated at 400,000 barrels per day, next May.
“The release of US oil can be effective in reducing price volatility and reducing sharp upward movements, but prices need a long-term solution,” said Avtar Sandow, director of commodities at Philip Futures.
In November, the United States announced a single plan to release 50 million barrels of strategic oil reserves, mostly from the same sale.
US Oil Stocks
The new announcement of the release of about 180 million barrels comes after US oil inventories fell by 3.4 million barrels in the week ending March 25, exceeding expectations for a decrease of 1 million barrels, and implied demand for gasoline and distillates also declined.
The slowdown in demand came with US production rising by 100,000 bpd to 11.7 million bpd after stagnating at 11.6 million bpd since early February.