Oil tumbled Thursday after the International Energy Agency (IEA), which includes the U.S., said it would release some of its emergency oil reserves to stave off a possible spike in energy prices that could put a strain on global economic recovery. The EIA will release 60 million barrels of crude oil—half of that from the U.S Strategic Petroleum Reserve which was last tapped into in 2007 when crude oil hit $147/barrel. This will create a short term glut of oil, but does not solve the problem of limited supply and growing demand.
Libyan oil supplies remain in limbo due to political unrest and expected increasing demand for oil were two of the reasons for the release of crude reserves. The EIA indicated it wanted to protect the already fragile economy from higher energy prices.
Federal Reserve chairman Bernanke also announced on Wednesday that he expects the slow economic recovery to linger into 2012 with slower than needed growth in the financial and housing sectors. The Dept of Labor also announced Thursday an increase in applications for unemployment benefits.
NYMEX close on Thursday—crude down $4.39/barrel at $91.02, heating oil (diesel) down 17 cents, and gasoline down 13 cents. At one point during the day crude was under $90/barrel and the refined products (gas/diesel) were down over 20 cents per gallon.
