• Oil slide on Thursday after reports the US may make a huge release of strategic reserves
  • Brent crude was on course for a weekly loss of 11%, its largest weekly decline in almost two years.
  • An official US announcement could come on Thursday, overshadowing an OPEC+ meeting.

Oil prices fell on Thursday following reports that US President Joe Biden could approve to release of as much as 180 million barrels from its official stockpiles. 

Biden's administration may release as many as 180 million barrels of oil in total, Bloomberg reported on Thursday, citing people familiar with the matter. An official announcement may come later in the day.

Brent crude futures dropped 4.07% to trade at $107.37 a barrel by mid morning in Europe, set for a decline of 11% this week, the largest since early April 2020, while West Texas Intermediate fell 4.99% to $102.75 a barrel.

"The news this morning is that the US is considering releasing 180 million barrels from SPR at a possible rate of 1 million barrels per day, which would imply a six-month release period," Bjarne Schieldrop, Chief Commodities Analyst at SEB wrote

The US currently has around 570 million barrels in its Strategic Petroleum Reserve and has made prior releases this year to try to temper energy prices, which are a key reason consumer inflation is at 40-year highs.

Biden is expected to make an announcement later on Thursday where he will reveal details of the plan, according to sources. Prices had risen to 14 year highs earlier this month as Russia invaded Ukraine, the planned release is aimed at lowering these prices. 

Meanwhile the International Energy Agency will hold an emergency meeting on Friday to decide on a joint release of oil reserves, according to the New Zealand energy ministry.

Russia has faced a raft of international sanctions over its invasion of Ukraine, but apart from a ban on its fuel imports from the US and the UK — neither of which is a major consumer of Russian energy products — its oil and gas sector has remained largely untouched.

Sanctions from Europe could remove as much as 3 million barrels per day from the global market, according to analysts' estimates, so while a US reserve release would alleviate some pressure on consumers, it would not change much in terms of the structural deficit in the market.

"The US mostly holds medium sour crude in its reserves. The release is thus great for US refineries as they are built for this kind of crude and they can no longer take Russian Urals crude (medium sour) due to sanctions. SPR releases usually have a limited impact on prices except for the first initial impact," Schieldrop said.

The OPEC+ group of exporters, which includes Russia, also meets on Thursday to discuss their supply policy for May. At the moment, the group, effectively headed by Saudi Arabia, has resisted international pressure to commit to faster increases in joint crude output. Saudi Arabia and the UAE have also explicitly ruled out removing Russia, the world's third-largest oil producer, from the alliance.

"The most likely scenario is that the extended cartel will decide to raise production further by 430,000 barrels per day. The prospect of a massive release of oil from the reserves of consumer countries is almost bound to deter OPEC+ from stepping up its oil production to any greater extent," Commerzbank strategists said.

Read more: The founder of a commodities ETF provider managing over $1.5 billion shares his outlook for 8 assets that have experienced major supply chain disruption and elevated prices during the Ukraine crisis

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