Yahoo Finance Oil prices slump as Joe Biden vows to release one million barrels a day
Oil market volatility continued on Thursday, with benchmark prices dropping sharply after the US took steps to cool crude prices that are feeding into soaring inflation across the US economy.
The Joe Biden administration announced its releasing as much as 180 million barrels in the next six months from its Strategic Petroleum Reserve.
This means around one million barrels will be released per day, draining nearly a third from its emergency reserves. The move, which the White House described as "unprecedented" will see the biggest release since November 2021.
Biden will also invoke Cold War powers to encourage domestic production of critical minerals for batteries for electric vehicles and other uses.
"A drip release of 1 million barrels of oil is on the cards for the next six months, a sign that there is not expected to be a quick resolution to the crisis in Ukraine, which has squeezed oil supplies," said Susannah Streeter, senior investment and markets analyst at Hargreaves and Lansdown.
Since Russia's invasion of Ukraine, oil prices have held above $100 (£76.20) a barrel, rising to record highs and dipping sharply as economic sanctions rattled markets and traders boycotted Moscow.
A lockdown in the world's biggest oil importer, China also helped push prices lower this week.
On Monday, Shanghai, a key financial and manufacturing hub and home to over 26 million people, entered a staggered lockdown, to conduct mass COVID testing to try and stem an outbreak.
Brent crude (BZ=F) fell 5% to $107.82 a barrel. US light crude (CL=F) was 5.1% lower to $102.38 in electronic trading on the New York Mercantile Exchange at the time of writing.
On Thursday, the Organisation of Petroleum Exporting Countries and Allies (OPEC+), said it will stick to modest oil output rises, resisting industry pressure to pump more crude to fill supply gaps.
The cartel will add 432,000 barrels of oil per-day to the market from May.
The group, which includes Russia, which ditched the International Energy Agency (IEA) as a data source, resisted calls from the US and the Paris-based agency to release more oil to tame surging prices.
Only two cartel members, Saudi Arabia and the United Arab Emirates, have the spare capacity to offset the potential market shortfall.
Danni Hewson, financial analyst at AJ Bell, said: "Today OPEC+ decided against the change in direction that might have helped bring the price of a barrel of Brent Crude back under $100 a barrel, several members steadfastly refusing to engage in global politics instead insisting balancing oil markets must take precedence.
"Sanctions against Russia have distorted supply and though Washington’s move to release stored oil has cooled markets it’s only a stop gap."
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There is also a diplomatic push to encourage a coordinated global release by IEA members.
Earlier in March, the IEA warned that global markets could be denied 2.5 million barrels a day of Russian oil from April as sanctions take hold and buyers shun Russian supplies.
The Paris-based agency also cut its demand forecast for the second to fourth quarters of this year by 1.3 million barrels per day (bpd).
IEA said a move by its members to release 60 million barrels from emergency supplies would initially provide a buffer for energy markets but these could not address long-term supply issues.
Read more: Oil prices dip as Shanghai enters phased COVID lockdown
Prices in other commodities including wheat and corn also plunged recently as peace talks between Ukraine and Russia lift hopes of a de-escalation in the war, easing worries about supply disruption.
Wheat slumped as much as 8%, dropping below the $10 a bushel mark for the first time since early March, while Corn sank 3.6% to a three-week low, and Minneapolis wheat dropped by the maximum allowed.
Meanwhile, natural gas prices have fluctuated between gains and losses as investors weigh Russian president Vladimir Putin's demand for ruble payments and supply shortages.
Benchmark European surged 1.5% after declining as much as 9.9% earlier on Thursday. The UK equivalent was up just over 2%.
It comes after Germany activated an emergency gas plan on Wednesday as Putin threatened to cut supplies if payments are not made in rubles, something which the G7 has rejected.
The move could see the bloc's largest economy switch to biogas as it braces to ration supplies. Russia accounted for 55% of German gas imports last year, falling to 40% in the first quarter of 2022.
On Thursday, Putin threatened to cut off gas supplies to Europe if countries refuse to pay in rubles.
The Russian leader said he had signed a decree saying customers must pay in the local currency from 1 April or their contracts will be terminated. The G7 has previously rejected the demand.
Watch: Why are gas prices rising?
