Adedapo Adesanya
By Adedapo Adesanya
Oil prices plunged more than 5 per cent on Thursday as the United States government announced that it will release 1 million barrels per day of oil for the next six months from the Strategic Petroleum Reserve (SPR) to arrest the high prices hurting the economy.
While making the announcement yesterday, the President of the US, Mr Joe Biden, said the release of oil from America’s reserves was an effort to bring down high fuel costs, noting that up to 180 million barrels of oil over six months is the largest since the reserve was created in 1974.
This makes it the largest-ever SPR release by more than three folds followed by the second largest on record which was the 50 million barrel released in November.
This development affected the price of the Brent crude as it fell by 4.88 per cent or $5.54 to sell at $107.9 per barrel, while the West Texas Intermediate (WTI) dropped 6.99 per cent or $7.54 to trade at $100.3 a barrel.
Energy prices have surged to record highs on Russia’s invasion of Ukraine and subsequent supply concerns, driving spikes in inflation across the global economy.
Oil prices dropped on reports of the move, which is aimed at easing a supply crunch sparked by war in Ukraine.
While the news was unprecedented, analysts noted that the release of additional reserves is unlikely to be enough to compensate for lost supplies from Russia – the world’s second-biggest oil exporter after Saudi Arabia.
Meanwhile, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) concluded that no change in production plans is needed, agreeing to lift the group’s production by another 432,000 barrels per day starting in May after its Thursday meeting.
The 32,000 barrels per day above the originally agreed to a quota of 400,000 barrels per day is due to shifting baselines of five of its members.
Saudi Arabia’s production quota has been lifted to 10.549 million barrels per day, with Russia’s quota lifted by the same amount. The UAE’s quota is 3.04 million barrels per day, Kuwait’s is 2.694 barrels per day, and Iraq’s is 4.461 million barrels per day.
OPEC+ has ignored calls from several other countries—including the United States—to boost production by more than planned as high gasoline prices weigh heavily on consumers.
The next OPEC+ meeting to agree on the plan for June is set to be held on May 5.
Meanwhile, the International Energy Agency (IEA) will hold an emergency meeting on Friday to discuss oil supply concerns, Australian Energy Minister, Mr Angus Taylor announced on Thursday.
