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Oil Prices Dive as US Weighs Record Reserves Release

Oil Prices Dive as US Weighs Record Reserves Release

Thursday, 31 March, 2022 - 06:15
Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. REUTERS/Stringer/Files

Oil prices plunged more than $5 a barrel on Thursday on news the United States was considering the release of up to 180 million barrels from its strategic petroleum reserve, the largest in the near 50-year history of the SPR.

Brent futures for May fell $5.47, or 4.8%, to $107.98 a barrel at 0608 GMT. The May contract expires on Thursday and the most actively traded June futures were down $5.26 to $106.18.

US West Texas Intermediate futures for May delivery fell $6.23, or 5.8%, to $101.59 a barrel after earlier slipping to a low of $100.85.

US President Joe Biden will give remarks later on Thursday regarding his administration's actions aimed at lowering gasoline prices that have risen to records following 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 coordinated release."

International Energy Agency (IEA) member countries are set to meet on Friday at 1200 GMT to decide on a collective oil release, a spokesperson for New Zealand's energy minister said on Thursday.

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

The US oil release may be effective in reducing wild volatility and curtail sharp uptrend movements, but with OPEC+ still unwilling to uphold production, prices need a long-term solution, Reuters quoted Avtar Sandu, a commodities manager from Phillip Futures as saying.

Oil settled up around 3% on Wednesday amid supply concerns as peace talks to end the war between Russia, which calls its actions a "special operation", and Ukraine have stalled.

Russia is the world's second-largest oil exporter and sanctions imposed as punishment for the invasion have disrupted flows from the country.

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