By Peter Nurse
Investing.com -- Oil prices fell sharply Thursday following reports the Biden administration is set to announce plans to release a substantial amount of oil from emergency reserves in a new effort to drive down oil prices.
By 9:05 AM ET (1305 GMT), U.S. crude futures traded 4.9% lower at $102.56 a barrel, while the Brent contract fell 4.4% to $106.53.
U.S. Gasoline RBOB Futures were down 3.4% at $3.1752 a gallon.
A number of news agencies reported late Wednesday that the U.S. government is set to announce, potentially later Thursday, plans to release up to 1 million barrels of oil a day for six months from the Strategic Petroleum Reserve to combat crude prices which have soared above $100 a barrel in the wake of Russia’s invasion of Ukraine.
International Energy Agency member countries are also due to meet on Friday to decide whether to join in with a collective oil release.
These releases would be much larger than the last effort to bring prices down earlier this year and come with U.S. President Joe Biden under mounting political pressure to reduce domestic gasoline prices.
That said, doubts remain about the likely long-term success of such a measure.
“The release of the SPR is supposed to happen when there is a physical scarcity of the oil to the refineries. SPR release to ‘adjust’ the prices is just a market manipulation. It never worked,” tweeted Danilo Onorino, an asset manager at Dogma Capital.
The move by some of the globe’s major consumers to try and reduce crude prices comes as the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, once again decided against deviating from its schedule of gradual production increases.
OPEC+ ratified the 432,000 barrels a day supply increase scheduled for May at an online meeting on Thursday, a decision that took just over 10 minutes and was in line with expectations.
The group warned the global economy would see a major blow from a prolonged conflict in Ukraine, according to an internal report seen by Reuters, but it has still resisted being drawn into the political crisis caused by the military aggression of one of its leading members.
“Another OPEC meeting where members put the stability of the group above the stability of the market,” tweeted Ole Hansen, head of commodity strategy at Saxo.