Oil prices fell on Friday after the US Administration's plan to release the largest ever amount from its emergency crude oil stocks, corresponding to almost half of the country’s oil reserves together with the previous pledges of US President Joe Biden.
International benchmark Brent crude was trading at $103.45 per barrel at 0655 GMT for a 1.20% decrease after closing the previous session at $104.71 a barrel.
American benchmark West Texas Intermediate (WTI) was at $98.94 per barrel at the same time for a 1.33% loss after the previous session closed at $100.28 a barrel.
US President announced Thursday the release of 1 million barrels per day (bpd) for six months to drive down prices at the pump and 'to ease the pain that families are feeling.”
Biden also called on Congress to pass legislation that would punish oil companies that do not use existing leases on federal lands after one oil CEO said his firm would not increase production no matter how much prices rose.
Pioneer Chief Executive Officer Scott Sheffield told Bloomberg News in February, 'Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans. If the president wants us to grow, I just don’t think the industry can grow anyway.”
After the latest pledge of 180 million barrels, the total withdrawals under Biden Administration so far make up around 260 million barrels against the country’s Strategic Petroleum Reserves (SPR) of 568 million, which corresponds to almost 50% of the working capacity, said Randall Mohammed, a financial representative of US-based Northwestern Mutual and energy market commentator.
Mohammed said the move is 'dangerously low, unless there's a guaranteed plan to replenish.'
'I would be very surprised if Congress agrees to this. If the argument is to reduce domestic gas prices in the short term to score political points, we are going down the wrong road. The function of the SPR is not to manipulate prices, but rather protect the US against a supply disruption,' he added.
Biden’s 180-million stockpile release was his administration's latest effort to ease the skyrocketing oil and gas prices. Biden also initiated a collective move with some other major oil consuming countries in November, pledging to release 50 million barrels.
This followed the country’s 30 million barrels of contribution to the International Energy Agency’s (IEA) 60-million barrel SPR release move.
The member countries of the IEA will convene at noon on Friday to discuss a further emergency oil release on top of their 60 million barrels.
Experts say the market is cautious over doubts on the efficacy of the release emerged.
'Previous releases from the SPR have taken time to reach the market and have had little impact on prices. The White House said the goal was to create a bridge for US supply until third quarter, when domestic production is expected to increase. However, the release could have the opposite impact by dis-incentivizing more supply,' warned ANZ commodity strategist Daniel Hynes.
By Sibel Morrow