Oil prices plummet 4% as the US weighs up largest-ever release from its strategic reserves

The price of oil fell on Thursday after reports that US President Joe Biden could approve the release of as much as 180 million barrels from its official inventories.

As many as 180 million barrels of oil may be released by the Biden administration, according to people familiar with the matter. An announcement may be made later in the day.

West Texas Intermediate fell 4.99% to $102.50 a barrel by mid morning in Europe, which was set for a decline of 9% this week, the largest since April 2020.

The news this morning is that the US is considering releasing 180 million barrels from SPR at a possible rate of 1 million barrels per day, which would imply a six-month release period.

The US currently has around 570 million barrels in its Strategic Petroleum Reserve and has made prior releases this year to try to temper energy prices, which are a key reason consumer inflation is at 40-year highs.

Sources say that Biden will reveal details of the plan later on Thursday. Prices had risen to 14 year highs earlier this month as Russia invaded Ukraine, the planned release is aimed at lowering these prices.

The New Zealand energy ministry said that the International Energy Agency will hold an emergency meeting on Friday to decide on a joint release of oil reserves.

Russia's oil and gas sector has not been affected by the international sanctions it has faced, apart from a ban on fuel imports from the US and the UK.

According to analysts, European sanctions could remove as much as 3 million barrels per day from the global market, so while a US reserve release would alleviate some pressure on consumers, it would not change much in terms of the structural deficit in the market.

Medium sour crude is mostly held by the US in its reserves. The release is great for US refineries as they are built for this kind of crude and they can no longer take Russian Urals crude due to sanctions. Schieldrop said that SPR releases have a limited impact on prices.

The group of exporters, which includes Russia, will meet on Thursday to discuss their supply policy for May. The group, headed by Saudi Arabia, has resisted international pressure to increase crude output. Russia, the third-largest oil producer in the world, will not be removed from the alliance.

The most likely scenario is that the extended cartel will raise production by 430,000 barrels per day. Commerzbank strategists said that the prospect of a massive release of oil from the reserves of consumer countries is almost bound to deter the group from increasing its oil production.

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