Oil falls to $114 as US considers oil release

Saturday, 18 August 2012 00:56 - - {{hitsCtrl.values.hits}}

LONDON, (Reuters): Brent crude oil fell to around $114 on Friday after the United States said it was considering the possible release of oil reserves to dampen prices and the Israeli president spoke out against any lone Israeli attack on Iran.

News the White House was ‘dusting off old plans’ for a potential release of strategic oil stocks helped knock more than $1 per barrel of Brent, which hit a three-month high on Thursday.

The global benchmark has risen more than a third in less than two months on worries that conflict over Iran’s disputed nuclear program could lead to war, disrupting oil supplies from the Middle East.

But the oil price rally has come at a time when world economic growth is slowing, dampening demand for fuel, and oil supplies have been ample, helping re-stock inventories, and many investors feel the recent price rises have been overdone.

Brent crude fell $1.40 to a low of $113.87 a barrel before recovering to around $114.00 by 1008 GMT.

The September contract which expired on Thursday ended at the highest since 2 May. US oil slipped 40 cents to $95.10, after settling up $1.27. US officials will monitor market conditions over the coming weeks, watching whether gasoline prices fall after the 3 September Labour Day holiday, in line with usual practice, a Washington source with knowledge of the situation told Reuters.

The United States has not yet held talks with international partners about a coordinated move.

The source said Britain, France, Germany and other partner nations in the Paris-based International Energy Agency (IEA) had been receptive to a potential release a few months ago when conditions were similar.

Britain’s energy ministry said on Friday it was prepared to ask the IEA to take action to deal with high oil prices, however neither it nor its partners had made any decisions to release stocks.

Japan and South Korea saw no need yet for a release from reserves, government sources said on Friday.

Oil prices were also dampened by easing concerns of a supply disruption from the Middle East after Israeli President Shimon Peres downplayed the prospect of a unilateral strike on Iran.

Oil prices received some support from comments by German Chancellor Angela Merkel on Thursday, which helped push stock markets to multi-month highs on Friday and boosted the euro.