MercoPress. South Atlantic News Agency

US and allies agree to release 60 million barrels of their oil reserves

The International Energy Agency announced member countries have agreed to send a “strong message to global oil markets that there will be no shortfall”

The United States and allies will be releasing 60 million barrels from their reserves, in an effort to contain the effect on supply and prices of the Russian invasion of Ukraine. Thirty million will come from the US Strategic Petroleum Reserve and the other half from allies in Europe and Asia.

The International Energy Agency announced on Tuesday that member countries have agreed to the release from emergency reserves to send a “strong message to global oil markets that there will be no shortfall” as a result of Russia's invasion of Ukraine.

The White House said the release “is another example of partners around the world condemning Russia's unprovoked and unjustified invasion of Ukraine and working together to address the impact of President Putin's war of choice.”

“President Biden was clear from the beginning that all tools are on the table to protect American businesses and consumers, including from rising prices at the pump,” the White House said in a statement.

However the oil market was not immediately impressed. US crude spiked about 10% Tuesday morning to an intraday high of US$ 105.14 a barrel. That's the highest level since 2014. Brent crude, the world benchmark, soared about 8% to US$ 105.40 a barrel.

“The bottom line is this is not enough to cool off the market. It's a bit of a band-aid solution,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. The invasion of Ukraine has driven concerns about a supply disruption from Russia, the world's No. 2 oil producer.

High oil prices have lifted prices at the US gas pump to seven-year highs. The national average for regular gasoline rose to US$ 3.62 on Tuesday, up about 9 cents in a week and 24 cents in a month, according to AAA. At some point, energy prices could get so expensive that it erodes demand from consumers and slows the broader economy.

Chevron CEO Mike Wirth expressed support on Tuesday for governments to release emergency stockpiles of oil to offset supply fears triggered by Russia's invasion of Ukraine. “I do think a coordinated response by multiple countries could help in the near-term” Wirth said.