Meanwhile, OPEC agrees to maintain its output strategy: File image/Pixabay
The roller coaster that defines oil trading in 2022 took another spectacular downward dip on Thursday, with prices tumbling 7 percent after U.S. president Joe Biden announced the largest ever Strategic Petroleum Reserve release and called on oil companies to increase drilling in order to boost supply.
This is the third time Washington has tapped the SPR in the past six months to no discernible effect for consumers at the pump; the latest release consists of 1 million barrels per day (bpd) for six months, with a possible 30 million to 50 million barrels of oil that could be released in addition by allies and partners.
Biden remarked, "This is a moment of consequence and peril for the world, and pain at the pump for American families; it's also a moment of patriotism."
Roger Read, senior energy analyst, Wells Fargo Securities
In the end, it's a little bit of a Band Aid
Roger Read, senior energy analyst at Wells Fargo Securities, noted that Biden's release is about 1 percent of daily global production and 5 percent of U.S consumption: "In the end, it's a little bit of a Band Aid."
Still, the release was viewed by some as impressive: John Kilduff, founding partner at Again Capital, remarked, "This is a market where every barrel counts and [the SPR release] is a significant volume of oil to be put on the market for an extended period of time."
Goldman Sachs was of a slightly different mindset: "This would remain…a release of oil inventories, not a persistent source of supply for coming years; such a release would therefore not resolve the structural supply deficit, years in the making,"
Accordingly, West Texas Intermediate on Thursday settled down $7.54, or 7 percent, at $100.28 per barrel, after touching a low of $99.66; Brent closed down $5.54, or 4.8 percent, at $107.91 per barrel.
The more actively traded June futures were down 5.6 percent at $105.16, after falling by $7 earlier in the session.
Meanwhile, members of the International Energy Agency are set to meet on Friday to decide on a potential collective oil release to offset lost Russia exports due to sanctions for its invasion of Ukraine.
Also, and as expected, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia agreed at a meeting on Thursday to maintain its current output and raise its May production target by 432,000 bpd.
Tamas Varga, analyst at PVM Oil Associates, said, "The decision will be greeted with disappointment from consuming nations."