Oil prices fall more than $5 a barrel as Biden weighs release of massive reserves

FILE PHOTO: Storage tanks are seen at Marathon Petroleum’s Los Angeles refinery, which processes domestic and imported crude oil, gasoline, diesel fuel and other petroleum products in Carson, California, USA, 11th 2022. Image captured by a drone. REUTERS/Bing Guan

March 31, 2022

(Reuters) – Oil futures fell more than $5 a barrel on Thursday morning on news that the Biden administration is considering releasing about 1 million barrels of oil from strategic reserves a day for several months to calm soaring crude prices.

Brent futures were down $4.71, or 4.2%, to $108.58 a barrel and US West Texas Intermediate futures were down $5.45, or 5%, to $102.74 a barrel by 0035 GMT.

The Biden administration is due to make remarks later Thursday in which he is expected to announce the plan aimed at slashing gasoline prices, which have hit record levels following Russia’s invasion of Ukraine. Prices had settled around 3% on Wednesday, amid supply concerns as peace talks between Russia – which calls its actions a “special operation” – and Ukraine appeared to have stalled.

“It’s emotional shock, but if recent history is any indication, the release of the reserve will only be a temporary fix and put a band-aid on a broken leg,” said Stephen Innes, Managing Partner at SPI Asset Management.

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

The release comes as US oil inventories fell 3.4 million barrels in the week ended March 25, beating forecasts of a 1 million barrel drop, but implied demand for gasoline and distillates also fell.

An apparent slowdown in demand came as US production rose 100,000 barrels per day to 11.7 million barrels per day, after being flat at 11.6 million barrels per day since early February.

(Reporting by Liz Hampton; Editing by Kenneth Maxwell)