London-traded Brent, the global oil benchmark, settled down $5.57, or 5.3%, at $101.07 per barrel on Wednesday. Its low for the day was $100.68.
New York-traded US crude benchmark West Texas Intermediate, or WTI, settled down $5.73, or 5.6%, at $96.23, after an intraday low of $95.86.
Traders who are bullish on oil said the reserves releases will not make much of a difference to crude prices over the longer term if supply remains in a deficit.
In the short term, the actions of the Biden administration and governments of other oil consuming countries have started hurting this year’s energy rally, said analysts.
“On a daily basis, this is causing havoc to the market’s volatility,” John Kilduff, partner at New York energy hedge Again Capital, said.
Demonstrating the recent volatility in oil, Brent fell 13% last week for its biggest weekly decline since April 2020, after finishing the first quarter up 39%.
WTI, meanwhile, broke the key $100 support last week, falling about 13% just like Brent, for its worst week since April 2020. That came despite a 33% rally in the first quarter.
According to the IEA on Wednesday, it will release 120 million barrels from the reserves of its members. The release will be split evenly between the United States and non-US members, those familiar with the plan said.
The IEA release would come on top of the 180 million barrels that the Biden administration said last week it would issue from the US Strategic Petroleum Reserve over the next six months.
Cumulatively, that meant that 240 million barrels would be landing on the open market for oil between May and October, equating to some 1.33 million barrels per day.
That would be more than triple the monthly increments of 400,000 barrels per day that global oil producers under the Saudi-controlled and Russian-steered OPEC+ alliance have been doing.
OPEC+ is keeping at least four million barrels of regular daily supply needed by consumers off the market to ensure that crude prices stay at above or around $100 per barrel, which has been the norm since the US and EU sanctions imposed on Russia for its February 24 military operation in Ukraine.
Separately, the delivery of some 3.0 million barrels per day of Russian oil exports is being delayed by sanctions, with some being denied altogether.
Adding to Wednesday’s bearish sentiment in oil was data from the Energy Information Administration showing US crude oil inventories rose last week for the first time in three weeks while stockpiles of distillates, which provide the diesel for trucks, buses and trains and fuel for jets, climbed a second week in a row,
The increases raised questions about energy demand in the world’s largest oil consuming country amid pump prices of fuel hovering near record highs, said industry analysts.
WTI hit a 14-year high of $130 while Brent surged to almost $140 on March 7. Consequently, US pump prices of gasoline hit record highs above $4.35 per gallon.
Both WTI and Brent have come off those highs since, as the Biden administration steadily released oil each week from the US reserve. Last week alone, some 3.7 million barrels were released.
Despite this, gasoline at US pumps has held above $4 per gallon on the average. Analysts say the inflation fueled by gasoline, which was about $1.50 higher than a year ago, could eventually lead to demand destruction for oil.