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Oil prices drop as Biden considers releasing reserves

10 months ago

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Oil prices have fallen sharply after reports that the US is set to take new steps to bring down high fuel costs. The Biden administration is reportedly considering the release of up to 180 million barrels of oil in the coming months from the Strategic Petroleum Reserve. If confirmed, this will be the largest-ever release since the reserve was created in 1974.  The war in Ukraine has rocked global energy markets in recent weeks over concerns that supplies will be cut. As markets opened in New York, US oil benchmark West Texas Intermediate (WTI) was 5.3% lower at about $ 102 a barrel, while Brent Crude was also down by 5% at around $ 108. The soaring cost of fuel has become a major political issue in the US ahead of mid-term elections in November.  Without giving further details, the White House said that Biden would deliver remarks at 1.30 p.m. local time yesterday (31 March), on “his administration’s actions to reduce the impact of (Russian President Vladimir) Putin’s price hike on energy prices and lower gas prices at the pump for American families”.  News of the potential major release of oil by the US came as the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), including Russia, met yesterday. After just 12 minutes of deliberation, the group of major oil producing nations, which is known as the OPEC+, said it was sticking to its existing deal to gradually increase production. “The consensus on the outlook pointed to a well-balanced market,” the group said in a statement. “Current volatility is not caused by fundamentals, but by ongoing geopolitical developments.”  The cost of oil has jumped in recent weeks, with Brent Crude hitting $ 139 a barrel earlier this month after Russia’s invasion of Ukraine and sanctions slapped on Moscow by the US and its allies. Energy prices have fallen back since then, but Brent Crude is still almost 70% higher than it was a year ago. Global energy supplies had been tightening for months as economies started to reopen as they relaxed pandemic lockdown measures. That was made worse in recent weeks by expectations that Russian oil exports could fall by as much as three million barrels a day.  Russia is the world’s second-biggest oil exporter after Saudi Arabia. Most other major energy-producing nations are either at full capacity or are unwilling to increase output. The US, which is the world’s largest oil producer, is currently pumping out 11.7 million barrels of oil a day, but that is not enough to meet global demand.  If confirmed, the release of additional reserves would amount to about one million barrels more a day – not enough to replace Russia’s supply. Meanwhile, the International Energy Agency (IEA) has called an emergency meeting for today (1 April). It is unclear whether other IEA members – which include 29 nations such as the UK, France, Germany, and Japan – will follow the US by releasing oil reserves. Also yesterday, Japan said that it would take emergency measures to secure supplies of seven strategic materials it relies on heavily from Russia or Ukraine as the war and sanctions cause disruptions to supplies. The country’s Industry Minister said the actions include government support to boost domestic production, alternative procurement, and to help technological developments to reduce use of the materials, which include liquefied natural gas (LNG) and gases used in computer chip-making.  (BBC)

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