NEW YORK, LONDON: Oil futures fell sharply on Wednesday following a surprising rise in US crude stocks and after large consuming nations said they would release oil from reserves in conjunction with the United States to counter tightening supply.
Member states of the International Energy Agency will release 120 million barrels from strategic reserves, including 60 million from the United States, according to two sources familiar with the matter. That US 60 million commitment is part of Washington's previously announced plans to release a million barrels a day for the next six months for a rough total of 180 million barrels.
This is the second time the IEA, which includes big consumers like Japan, France and South Korea, has released barrels from its reserves this year. The group collectively has about 1.5 billion barrels in strategic reserves.
Brent crude futures fell $2.78, or 2.7 percent, to $103.86 as of 12:31 p.m. EST (1631 GMT). US crude fell $2.93, or 2.9 percent, to $99.04 a barrel.
Crude markets have been through weeks of volatility, with prices surging on supply concerns after Russia's invasion of Ukraine and subsequent sanctions on Moscow by the United States and its allies.
Lately the market has been pulling back following reserve releases along with worries of slowing demand in China, where a resurgent pandemic has prompted lockdowns of cities including Shanghai.
US crude stocks rose by 2.4 million barrels in the latest week, the US Energy Information Administration said, while analysts had expected a drawdown. Output also rose, hitting 11.8 million barrels a day, most since late 2021, and output is expected to continue rising. The US also released nearly 4 million barrels from its strategic reserve in the week.
"The SPR release was huge which does raise confidence that they can move a lot out of the reserve on a weekly basis," said Phil Flynn, senior analyst at Price Futures Group in Chicago.
US crude stocks rose unexpectedly in the most recent week as production reached its highest level since before the outset of the coronavirus pandemic, the Energy Information Administration said on Wednesday.
Crude inventories rose by 2.4 million barrels in the week to April 1 to 412.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop. That increase was in part due to a near 4 million barrel release from the US strategic reserves.
Distillate stockpiles, which include diesel and heating oil, rose by 771,000 barrels in the week to 114.3 million barrels. Distillate stocks on the US East Coast, however, are now at their lowest level since April 2003. The decline in supply has caused prices of some products to surge, including jet fuel. Refinery crude runs rose by 35,000 barrels per day in the last week, EIA said. Refinery utilization rates rose by 0.4 percentage point in the week to 92.5 per cent of overall capacity, the highest since June.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.7 million barrels in the last week, EIA said.
US gasoline stocks fell by 2 million barrels in the week to 236.8 million barrels.