WASHINGTON — Oil prices dropped sharply Thursday on news that the United States and Europe will sell 60 million barrels of oil from their strategic reserves over the next 30 days, a move experts called an important policy shift that should help restrain volatile energy prices.
Oil prices for month-ahead delivery fell by $4.39 a barrel, or almost 5 percent, to settle at $91.02 on the New York Mercantile Exchange. Oil prices rose by more than 20 percent earlier this year but closed Thursday near where they started the year. Gasoline prices nationally averaged $3.61 for a gallon of regular unleaded, down from $3.82 a month ago, but up sharply from $2.74 a year ago.
In simultaneous news briefings, the White House and the Paris-based International Energy Agency said that they'd release oil from emergency reserves, ostensibly to ensure adequate supply to refiners during the peak summer driving season.
Both said the protracted conflict in Libya has resulted in insufficient supplies of light sweet crude oil, more commonly refined in Europe, and that shortfalls were expected in coming weeks.
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The United States will release half the 60 million barrels, offering it for auction beginning next Wednesday. The U.S. consumes about 21 million barrels a day and the world about 88 million, but the 60 million barrels to be sold from the reserves nevertheless sends an important signal to oil producers and markets, analysts said.
Officials on each side of the Atlantic insisted that they weren't acting to affect prices per se, but rather to head off an anticipated shortage — which would drive up prices. The reserve was created in 1975 following the 1973-74 Arab oil embargo to give the nation an emergency supply in case of disruptions; it's not supposed to be tapped simply to drive down fuel price — as critics in Congress and business groups noted Thursday.
It's questionable whether the lost Libyan supply has made much difference to the global supply-demand equation. There's little evidence of a global shortage in oil. The Organization of the Petroleum Exporting Countries has about 4 million barrels a day of spare production capacity.
Refineries in the United States — the world's biggest oil consumer — are operating well below their capacity. Refiners are under investigation by the Federal Trade Commission for potential manipulation of oil prices.