Oil prices dip as US considers reserve release

Singapore — Oil prices dived more than $5 a barrel on Thursday as the US is considering the release of up to 180-million barrels from its strategic petroleum reserve (SPR) over several months to calm soaring crude prices.

Brent futures for May fell $5.47, or 4.8%, to $107.98 a barrel at 03.17am GMT. The May contract expires today and the most actively traded June future was down $5.22 to $106.22.

US West Texas Intermediate futures for May delivery fell $6.06, or 5.6%, to $101.76 a barrel after earlier slipping to a low of $100.85.

US President Biden will give remarks later on Thursday announcing the plan, three sources said, aimed at lowering gasoline prices that have risen to records after Russia’s invasion of Ukraine.

“If it turns out to be as much as that, it would be significant and so would certainly help to a certain extent to fill the shortfall, but not all of it,” said Warren Patterson, head of commodities strategy at ING, referring to the 180-million barrels figure.

“Another key question is whether this volume would be part of a wider co-ordinated release.”

The International Energy Agency (IEA) has called an emergency ministerial meeting for Friday to discuss oil supply, a spokesperson for Angus Taylor, the Australian energy minister, said on Thursday.

News of the potential US oil release overshadowed a meeting set for later on Thursday between the Organisation of the Petroleum Exporting Countries (Opec) and their allies including Russia. The group, known as Opec+, is expected to stick to its existing deal to gradually increase oil production.

Oil settled up about 3% on Wednesday, driven by supply concerns as peace talks to end the war between Russia, which calls its actions a “special operation”, and Ukraine have stalled.

Sanctions on Russia

Russia is the world’s second-largest oil exporter and sanctions imposed as punishment for the invasion have disrupted flows from the country, driving prices higher.

In early March, the Biden administration said it would sell 30-million barrels from the strategic reserves as part of a global release of 60-million barrels to lower prices.

In November, the US announced a plan to release 50-million barrels from the SPR, mostly through exchanges where the buyer agrees to replace the oil later.

“I guess we need to also see if this would be a straightforward release or an exchange,” ING’s Patterson said.

Some analysts remain sceptical about the impact of oil reserves release.