U.S. to Tap Oil Reserves to Boost Supply

Source:

"Oil prices dropped nearly 5% in response to the announcement."

Associated Press

Wary of a new surge in gas prices, the Obama administration has decided to release 30 million barrels of oil from the country's emergency reserve as part of a broader international response to lost oil supplies caused by turmoil in the Middle East and North Africa, particularly Libya.

Oil prices dropped nearly 5% Thursday in response to the announcement.

The release from the U.S. Strategic Petroleum Reserve will amount to half of a 60 million barrel international infusion of oil planned for the world market over the next month.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said Thursday.

Oil plunged nearly 5% Thursday after the International Energy Agency said it will release 60 million barrels of oil from its reserves to make up for a loss of Libyan exports in global oil markets.

The IEA, which includes the U.S., will release 2 million barrels per day over the next 30 days.

The IEA said the oil will help offset the loss of about 132 million barrels of high-quality Libyan crude, cut off by continuing unrest there.

"Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011," the agency said.

Benchmark West Texas Intermediate for August delivery fell $4.59, or 4.8%, at $90.82 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $6.78, or 5.9%, at $107.39 per barrel on the ICE Futures exchange.

Retail gasoline prices in the U.S. dropped for the 20th consecutive day to $3.61 per gallon.

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