AlwaysFree: US-Led SPR Crude Oil Release Unlikely Cut Prices Significantly: Analysts

US President Joe Biden has announced the planned release of 50 million barrels of crude from the US Strategic Petroleum Reserve (SPR). The move is part of a coordinated effort with China, Japan, South Korea, and India to curb soaring energy prices. Brent crude futures dropped 32 cents (0.4%) to $81.99 per barrel on Tuesday following the announcement, while US WTI slid 12 cents (0.2%) to $78.38 per barrel.

However, market participants and analysts doubted that it would push down prices significantly. They said that the release was already baked into prices. In addition, the coordinated release is estimated at between 70 million and 80 million barrels, smaller than the over-100 million barrels the market has been pricing in. 

Analysts noted that the impact of the release on oil prices would likely be short-lived. They said that it artificially eases the tightness in the oil market for the next one to two months. But declining upstream investment and a strong global demand recovery would continue to tighten supply. Tapping reserves can also put even further pressure on already low oil inventories. In addition, it can trigger a response from OPEC+, which might cancel plans to boost output, negating the effect of the release.

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