By Yasin Ebrahim
Investing.com – President Joe Biden announced Thursday the historic release of 1 million barrels a day from the U.S. strategic petroleum reserve to curb the surge in oil prices and reduce pain at the pump for Americans.
"Today, I'm authorising the release of 1 million barrels per day for the next six months, over 180 million barrels from the strategic petroleum reserve," Biden said.
The release would be carried out in tandem with other countries. The combined efforts could see supply increase "well over a million barrels a day."
The plan to release a record amount of supplies, if realized "would push reserves to their lowest level in almost 40 years," Commerzbank said. The president, however, has suggested the U.S. would look to replenish supplies when oil prices are lower.
"A six months bridge to the fall and we'll use the revenue from selling oil now to restock the Strategic Petroleum Reserve when prices are lower," Biden said.
The president said it was difficult to determine exactly how far gas prices would fall as a result of the release as it would also depend how many barrels of supplies other countries choose to release as part of the coordinated effort. Biden speculating that other countries could release "somewhere between 30 million to 50 million barrels." He added: "The higher the number the more likely the prices to come."
Some market experts have suggested that if 180 million barrels were to be released, the market would be oversupplied in the coming quarter, and could push down prices.
"If such a gigantic release of emergency reserves actually happens, the oil market would no longer be undersupplied in the second quarter, and would even be oversupplied in the third quarter based on the IEA’s current forecasts," Commerzbank said in a note.