Storage tanks at Marathon Petroleum's Los Angeles Refinery in Carson, California

Oil prices fall as US considers record reserves release

Image credit: REUTERS/Bing Guan

Oil prices have plunged following reports that the US is poised to make the largest ever release of emergency crude reserves to tackle soaring fuel costs.

The price of Brent crude – the most used way of measuring the UK’s oil price – fell by nearly $4 (£3.05) to $109.21 (£83.21) a barrel on reports that President Joe Biden is considering releasing up to 180 million barrels from the US Strategic Petroleum Reserve. This would be the biggest release since they created the reserve in 1974.

News outlets expect Biden to announce his administration’s latest measures to address soaring fuel prices later today (31 March).

“Desperate times, clearly call for desperate measures and clearly the Biden administration believes the spike in oil prices warrants this move to eat into the country’s emergency supplies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“A drip release of one million barrels of oil is on the cards for the next six months, a sign that the administration does not expect it to be a quick resolution to the crisis in Ukraine, which has squeezed oil supplies.”

The Ukraine conflict has resulted in fuel and energy costs soaring, with sanctions banning oil imports from Russia pushing the price up to around $139 (£106) a barrel at one stage earlier this month – the highest since 2008.

According to experts, prices have eased back since then, but crude costs still stand at nearly 70 per cent higher than they were a year ago.

Goldman Sachs analysts said the move would help the oil market to rebalance in 2022 but was not a permanent fix. “This would remain, however, 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.”

Members of the International Energy Agency are due to meet on Friday (1 April) to decide on a potential collective oil release, a spokesperson for New Zealand’s energy minister has said.

Oil rose by around 3 per cent on Wednesday (30 March) as peace talks stalled between Ukraine and Russia, the world’s second-largest oil exporter.

Western financial sanctions imposed on Moscow over its invasion of Ukraine have disrupted its crude oil and oil product exports.

Although Europe relies a lot more on Russia for its natural gas, the country is still the biggest single exporter of oil to the EU.

According to data from Eurostat, around a quarter of the bloc’s oil imports and around 46 per cent of its gas came from Russia in the first part of last year.

The UK is less reliant on Russia for both, but its prices largely mirror those in Europe.

Last week, energy giant Shell announced it was reconsidering its decision to pull out of the controversial Cambo oil field project in Scotland following oil price spikes.

Earlier this month, transport minister Grant Shapps announced the UK will phase out the import of Russian oil over the next 12 months in response to the invasion of Ukraine and step-up local fracking production.

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