Oil Prices Drop After 60 Million Barrels Released from Government Stockpiles

The International Energy Agency will release 60 million barrels of oil from various government stockpiles in an effort to lower crude prices. The 28-member group announced today it would release 2 million barrels a day for 30 days to fill the void left by the conflict in Libya. Half of the oil is coming from the United States. According to Reuters, the agency was moved to act "after the Organization of the Petroleum Exporting Countries failed to raise production at a meeting on June 8 and despite assurances from OPEC's biggest producer Saudi Arabia that it would lift supplies unilaterally." The Wall Street Journal notes that the unexpected announcement contributed to a fall in crude-oil futures, with the Nymex contract for August delivery down 5.6% to $90.07 a barrel in midmorning trade." Analyst Helen Henton, head of commodity research at Standard Chartered Bank says, "The timing is very strange though. It comes after the Saudis said they would increase output so it suggests they think this might not be enough. I think it will knock prices lower, I expect prices to be lower a month from now." Matt Smith, an analyst at Summit Energy in Louisville, Kentucky says "If they are going to release the 60 million barrels over a course of a few months, then they will be matching off the Libyan outage. Still, it would have made more sense if they did this immediately after the OPEC meeting. It looks like they missed their opportunity there."