Crude Oil Sells Off on SPR Release

​Oil prices fell on Thursday with news that the United States was considering the release of up to 180 million barrels from its strategic petroleum reserve, the largest in the near 50-year history of the SPR.  June futures were down $4.36 at $107.08, having earlier slid by more than $6.

U.S. President Joe Biden will be giving a speech later on Thursday with regard to the decision which is aimed at lowering gasoline prices given the record high prices that consumers are facing at the pump since the beginning of the Ukraine war. A release of 180 million barrels will help to rebalance the oil market in 2022 increasing supply by 1 million barrels per day (bpd) for six months. However, this is a temporary fix for the short term supply problems and will not resolve the structural supply deficit that has been building for many years.

If the US adminsitration go ahead with the 180 million barrels release from the SPR, then this will certainly have an effect on the oil market and we'll probably see prices decline to less than $100. This news comes after U.S. oil inventories fell by 3.4 million barrels in the week to March 25th, surpassing forecasts of a 1 million barrel drop. In conjunction with this, implied demand for gasoline and distillates has declined. Current prodcution in the US increased by 100,000 barrels per day after stalling at 11.6 million bpd since early February.

News of the potential U.S. release has overshadowed the OPEC+ meeting scheduled for Thursday, however, it is expected to be a non-eventful meeting with OPEC+ sticking to its deal to increase oil production gradually.