The problems in the Middle East and North Africa aren’t getting any better.
The oil market has lost 1.5 million barrels a day from Libya alone.
And as we move toward the peak of summer and the driving season, demand is going to rise.
To counter the loss in output for the summer months, the IEA has announced a plan to contribute 60 million barrels of oil to the market in increments of 2 million barrels a day over a 30-day period.
Half of this, 30 million barrels, will come from the U.S. Strategic Petroleum Reserve, a reserve of 727 million barrels along the coasts of Texas and Louisiana.
The reserve was started in the ‘70s during the Arab oil embargo, and it was intended for use in emergency situations.
Since that time, its resources have been required only twice: in 1991, during the Persian Gulf War, and in 2005, following Hurricane Katrina.
But oil prices have been on the rise due to the drop in production rates, and extra output from IEA nations will temporarily change this.
Following this announcement, oil prices on the NYME fell 5%, and Brent crude on the London-based ICE Futures dropped 6%.
Democrats believe this move is a smart one for the Obama administration, grateful for the relief it will afford families as we move into the summer months. With the high food prices, shrinking gas prices would offer at least some comfort.
Some Republicans, however, are not so happy. Fred Upton, Chairman of the House Energy and Commerce Committee, told the Washington Post he considers it “irrational,” as the reserve is for “energy emergencies, not political convenience.”
Energy Secretary Steven Chu let the public know this move is on behalf of the suffering global economy, and it is an attempt to aid global recovery.
The Dow Jones was down 1.7% on Thursday and the S&P 500 fell 1.5%.
This is probably due largely to the fact that, at the end of the previous week, applications for unemployment benefits increased by 9,000, according to Bloomberg.
The European markets are down as well, feeling the Greek debt situation.
That’s all for now,