Oil has tumbled on signs the Biden administration is considering tapping US reserves again in a potentially massive release to tackle rising inflation and supply shortages following Russia’s invasion of Ukraine.
West Texas Intermediate futures fell more than 5 per cent to trade near $US102 a barrel, trimming a fourth monthly gain. The US is considering a release of roughly 1 million barrels of oil a day for several months, said people familiar with the matter. The news comes ahead of an OPEC+ meeting Thursday and follows calls by key members for the US to trust its strategy of managing the market.
The US could release as much as 180 million barrels from its reserves, the people said, providing relief to a market that’s tightened significantly due to the war in Europe. The invasion has fanned inflation and led to wild volatility across commodity markets, with global benchmark Brent crude set for the widest trading range on record this month.
The US plans are accompanied by a diplomatic push for the International Energy Agency to co-ordinate a global release. A final decision hasn’t been reached on that yet, but the White House may make an announcement on the US release as soon as Thursday, one of the people said.
“Suggestions that we could see up to 180 million barrels released over several months is significant and would help to ease some of the tightness in the market,” said Warren Patterson, head of commodities strategy at ING in Singapore. It would be the biggest release on record for the US, he added.
President Joe Biden has already ordered two large releases of oil from US reserves in the past six month but it’s done little to tame rampant prices. Saudi Arabia and the United Arab Emirates said this week that the US must trust its supply strategy after the cartel faced calls to pump more.
OPEC+ is expected to ratify a modest output increase of 432,000 barrels a day for May when it meets later Thursday, according to a Bloomberg survey. The alliance wrapped up its previous meeting on supply in a record 13 minutes, which was held just days after Russia invaded its neighbor.
The market is also facing the prospect of a hit to demand as China tackles a virus resurgence. The nation has initiated a series of lockdowns to curb its spread, including in Shanghai, which is starting to impact the economy — China’s manufacturing activity contracted this month.
Record US. gasoline prices may be crimping consumption as the cost to fill up tanks soars. US gasoline demand fell for a third consecutive week, according to the Energy Information Administration, defying seasonal trends.