Oil slumps as US considers record release of reserves

London — Oil prices plunged on Thursday on news that the US could release as much as 180-million barrels from its strategic petroleum reserve, the largest in the near 50-year history of the SPR.

Brent crude futures for May fell $4.87, or 4.3%, to $108.58 a barrel by 8.55am GMT. The May contract expires later on Thursday and the most actively traded June futures were down $5.08 at $106.36, having earlier slid by more than $6.

West Texas Intermediate futures for May delivery fell $5.90, or 5.5%, to $101.92 a barrel after touching a low of $100.53.

US President Joe Biden will speak later on Thursday regarding his administration’s actions aimed at lowering petrol prices that have risen to record highs since Russia invaded Ukraine.

“Desperate times, clearly call for desperate measures and clearly the Biden administration believes the spike in oil prices warrants this move to eat into the country’s emergency supplies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“A drip release of 1-million barrels of oil is on the cards for the next six months, a sign that there is not expected to be a quick resolution to the crisis in Ukraine, which has squeezed oil supplies.”

Goldman Sachs analysts said the move would help the oil market to rebalance in 2022 but was not a permanent fix. “This would remain, however, a release of oil inventories, not a persistent source of supply for coming years,” they said. “Such a release would therefore not resolve the structural supply deficit, years in the making.”

International Energy Agency member countries are due to meet on Friday to decide on a potential collective oil release, a spokesperson for New Zealand’s energy minister said on Thursday.

Opec and allies including Russia meet later on Thursday and are expected to stick with a planned increase in their May output target.

Oil rose by about 3% on Wednesday as peace talks stalled between Ukraine and Russia, the world’s second-largest oil exporter.

Western financial sanctions imposed on Moscow after its invasion of Ukraine have disrupted its crude and oil-product exports.

Reuters