Bloomberg reports that the International Energy Agency has coordinated the release of 60 million barrels of crude oil from stockpiles around the world, half of it coming from U.S. reserves, in order to lessen supply constraints and bolster a struggling global economy.
Oil tumbled to the lowest price in four months after the International Energy Agency said its members would release crude from strategic reserves.
Oil fell as much as 6 percent as the agency announced the release of 60 million barrels to help make up for a Libyan supply disruption. The IEA said 2 million barrels a day would be available in the first 30 days. Commodities and equities tumbled after U.S. jobless claims rose last week and the Federal Reserve cut its economic growth outlook yesterday.
“The big driver is the IEA number,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There’s been a constant string of negative news about the economy and a lack of direction from Washington, which makes for a very volatile market.”
Since it was founded in 1974, this is only the third time that the IEA has taken such an action, the first being the 1991 Gulf War and the second following Hurricane Katrina in 2005. IEA Executive Director Nobuo Tanaka said in a statement, “I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy”.
While the former will no doubt improve, I wouldn’t be so sure about the latter.