NEW YORK (CNNMoney) — The U.S. Department of Energy said it will release 30 million barrels of oil from the Strategic National Reserve to alleviate Libyan oil supply disruptions, adding more pressure to already-plummeting oil prices.
Local News 8 reports that the U.S. release is half of the 60 million barrel supply hike announced Thursday by the International Energy Agency, which includes the United States as one of its 28 member nations.
“Oil prices are getting assaulted on two fronts today,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Oil prices were already headed lower following Fed chief Ben Bernanke’s bummer of speech Wednesday. The Labor Department’s worse-than-expected report on weekly jobless claims added further fuel to fallout.
“Bernanke’s statement about the ‘slowing pace of recovery’ was the key to this down move,” said Dan Dicker, a former oil trader and author of “Oil’s Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy.”
Oil prices plunged $4.66, or more than 4.8%, to $90.75 per barrel after the news about the supply increase. At one point, they plummeted more than 5% to less than $90 per barrel for the first time since Feb. 22.
“There is plenty of supply,” Kilduff Group partner Mike Fitzpatrick told CNNMoney. “They want to push prices down to help the U.S. economy. Saudi Arabia called for this at the last OPEC meeting.”
The U.S. Energy Department said the reserve is at a “historically high level” of 727 million barrels.
Bernanke issued a gloomy forecast on the economy while also killing any hopes of further government stimulus. That triggered a stock decline Wednesday that carried into Thursday’s session, with the Dow plunging 220 points.
“We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery,” said Energy Secretary Steven Chu. “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.”
Libya is still locked in civil war, as rebels aided by NATO airstrikes try to unseat Mohammar Gadhafi.
In particular, Bernanke highlighted the stagnant job market and the potential impact of the Greek fiscal crisis. He projected that unemployment would “come down very painfully and slowly.”
Dicker said that oil prices were also “under pressure from growth slowdowns.”
— CNNMoney’s Poppy Harlow contributed to this report
Stephan Rockefeller, EastIdahoNews.com
Natalia Hepworth, EastIdahoNews.com
Robert Patten, EastIdahoNews.com columnist