By Peter Nurse
Investing.com -- Oil prices fell Friday, continuing the previous session’s sharp losses, after the U.S. confirmed plans for the largest release ever from its emergency reserves in order to tame surging crude prices.
By 8:15 AM ET (1215 GMT), U.S. crude futures traded 1.1% lower at $99.19 a barrel, while the Brent contract fell 0.7% to $103.99. The two benchmarks were on course for their biggest weekly falls in two years, both dropping over 12%.
U.S. Gasoline RBOB Futures were down 0.9% at $3.1299 a gallon.
U.S. President Joe Biden announced on Thursday the intention to release one million barrels per day for six months from the U.S. Strategic Petroleum Reserve, starting in May.
A number of major consuming countries could join the U.S. in releasing crude from their reserves, with International Energy Agency member countries holding a meeting Friday to discuss such a plan.
This comes with global oil prices soaring more than 30% this year, climbing above $100 a barrel, roiled by Russia’s invasion of Ukraine, adding to the cost-of-living crisis suffered by many governments around the globe.
That said, doubts remain about the likely long term success of such a measure.
“Whilst the volume is significant and it has put some immediate downward pressure on prices, the issue is that this is still a short term fix,” said analysts at ING, in a note. “As a result, we expect that the SPR release will likely cap prices, rather than provide significant downside in the medium term.”
This move comes after the Organization of Petroleum Exporting Countries and its allies, importantly including Russia, a group known as OPEC+, once again stuck to its plan to increase output by the planned 432,000 barrels a day from May 1.
“The group continues to hold the view that the current strength and volatility in the market is due to geopolitical concerns rather than fundamentals,” added ING.
Instead of looking for extra barrels of oil from OPEC+, traders may have to look at the Baker Hughes’ U.S. rig count later in the day, where signs of drilling activity have picked up sharply in recent months following the raised prospects for a lengthy period of above-trend prices.
The latest U.S. job report showed that nonfarm payrolls increased by 431,000 jobs in March, with the unemployment rate falling to a new two-year low of 3.6%, indicating that the U.S. economy continues to grow at a healthy rate.