Commodity Corner: Crude Drops on IEA's Surprise Move
Crude prices plummeted to a four-month low Thursday after the International Energy Agency (IEA) said it would release an emergency oil supply to alleviate high prices.
In an attempt to offset the supply disruption caused by Libya's civil war, the IEA said it will release 60 million barrels of oil over a 30-day period. Its members will release 2 million barrels of oil per day (bpd). Half of the amount will be provided by the U.S. Strategic Petroleum Reserve, which currently stores 727 million barrels of crude.
The IEA last tapped emergency resources in September 2005 after Hurricane Katrina disrupted production on the U.S. Gulf Coast.
Light, sweet crude lost $4.39 Thursday, settling at $91.02 a barrel. Prices traded as low as $89.69 and peaked at $94.47. Meanwhile, Brent crude ended Thursday's session at $107.26 a barrel, down $6.95. Goldman Sachs claims IEA's surprise release could cause Brent prices to decrease by $10-$12 a barrel by the end of July.
Likewise, natural gas for July delivery settled lower at $4.193 per thousand cubic feet. The drop came on government reports showing an increase in U.S. inventories. The U.S. Energy Information Administration (EIA) said stockpiles grew by 98 billion cubic feet last week. This marks the year's second-largest increase in U.S. natural gas inventories.
The intraday range for natural gas was $4.15 to $4.34 Thursday.
Front-month gasoline futures settled down 13.57 cents at $2.84 a gallon. Prices fluctuated between $2.785 and $2.955 a gallon.