published Thursday, June 23rd, 2011

Oil prices fall as international reserves are tapped

  • photo
    An oil pump works at sunset in the desert oil fields of Sakhir, Bahrain. (AP Photo/Hasan Jamali)

NEW YORK — Oil plunged nearly 5 percent Thursday after the International Energy Agency said it will release 60 million barrels of oil from its reserves to make up for a loss of Libyan exports in global oil markets.

The IEA, which includes the U.S., will release 2 million barrels per day over the next 30 days. Half of that will come from U.S. Strategic Petroleum Reserve, which currently holds 727 million barrels in underground caverns along the Gulf Coast.

The IEA said the oil will help offset the loss of about 132 million barrels of high-quality Libyan crude, cut off by continuing unrest there.

“Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011,” the agency said.

Benchmark West Texas Intermediate for August delivery lost $4.59, or 4.8 percent, at $90.82 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $6.78, or 5.9 percent, at $107.39 per barrel on the ICE Futures exchange.

The IEA announcement followed further indications of a slow economic recovery in the U.S. Federal Reserve Chairman Ben Bernanke on Wednesday warned that some problems — in the financial and housing sectors — would linger into next year. And on Thursday the Labor Department reported an increase in applications for unemployment benefits.

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