Oil Prices Drop with High Crude Supply and Possibility of Releasing Oil Reserves
Oil prices dropped with news of a surge in the inventories of U.S. crude and the suggestion of France that it is prepared to tap its strategic oil reserves to minimize high costs.
In New York, West Texas Intermediate crude prices for May delivery recently ended at $105.41 per barrel. That rate is lower by $1.92 in compared to the previous days.
In London, prices of Brent North Sea oil fell by 38 cents to finish at $124.16 per barrel.
WTRG Economics’ James Williams said that the oil market of New York sold off following the Energy Department’s somewhat bearish report.
According to the department, inventories of crude oil in the United States recently increased by 7.1 million barrels, three times higher than anticipated.
The huge build-up of oil stocks reawakened worries regarding the slow demand in energy of the largest oil consuming nation of the world.
Natixis’ commodities analyst Mr. Nic Brown said that the potential of a significant fall in demand in the weeks to come stays as a threat specifically for petrol as prices of fuel are at the highest level since the month of April in 2011.
The negative effect of soaring crude oil prices on the world economy has led to speculations that the U.S. will choose to tap its strategic oil reserves to strengthen supply.
Recently, France expressed its readiness to release several of its strategic reserves to aid in lowering crude prices.
Eric Besson, the Energy Minister of France, said that the United States requested them to do it and France favorably accepted the idea. He further added that they are presently waiting for the opinion of the International Energy Agency.
Valerie Pecresse, the spokeswoman and budget minister of the government said that France is partnering with the U.S. and Britain to convince the IEA to allow them to use their reserves to answer speculations on the energy markets globally.
Williams said that opting for strategic reserves is not a real solution but a temporary one. He said that the nations should either make more oil or consume less. He also warned that using the reserves will mean that the country will not have oil to utilize in real emergency.