Oil prices drop as Biden considers freeing up huge reserves

LONDON – Oil prices fell sharply on Thursday after reports that US President Joe Biden is considering freeing up to 180 million barrels of the country’s Strategic Petroleum Reserve (SPR).

Biden is due to make comments later on Thursday, with several outlets reporting that the plan to cool high crude prices will involve releasing about 1 million barrels of oil per day for several months.

international standard Brent crude May futures were down about 4% to $108.85 a barrel by 8:55 a.m. London time, paring earlier losses. American crude Futures for May delivery fell about 4.7% to $102.77 a barrel.

Gasoline prices jumped to record levels after the Russian invasion of Ukraine and subsequent supply concerns, driving up inflation across the global economy.

Russia is the world’s second largest oil exporter, and unprecedented punitive international sanctions that followed the invasion have disrupted outflows from the country.

In a research note Thursday, commodity analysts at Goldman Sachs said that the release of US reserves would help the oil market rebalance in 2022, but would not solve its structural deficit.

“This will reduce the amount of necessary demand destruction caused by price, the only oil rebalancing mechanism currently available in a world without buffers and supply elasticity,” Goldman Sachs said.

“However, this will still be a release of oil stocks, rather than a steady source of supply for the coming years. Thus, this release will not solve the structural supply deficit, which has been years in the making.”

They added that lower prices in 2022 will support oil demand while slowing the acceleration of US shale production, leaving a deficit in 2023 and a potential need to refill US reserves.

Australian Energy Minister Angus Taylor announced Thursday that the International Energy Agency will hold an emergency meeting on Friday to discuss oil supply concerns.

The Organization of the Petroleum Exporting Countries and its allies including Russia (better known as OPEC+) will meet later on Thursday and are expected to maintain their current agreement to slowly increase production, after cutting production dramatically during the COVID-19 pandemic and associated declines. On request.