London: Oil’s deep sell-off paused on Friday as the impact of a surprise announcement of an emergency stocks release faded.
By 2:29pm, Brent crude futures were 24 cents higher at $107.50, while US crude futures recovered 87 cents to $91.89.
Brent had fallen around 6 percent on Thursday after consumer watchdog the International Energy Agency (IEA) announced the release of 60 million barrels of government-held stocks over the next 30 days.
The extra oil - only the third emergency release in the IEA’s 37-year history -- will increase global supply by some 2.5% for the next month.
Leading commodities banks JP Morgan and Goldman Sachs cut their oil price forecasts following Thursday’s IEA announcement.
The biggest impact on Thursday was on the spreads between futures contracts as the market reacted to increased availability of higher quality crudes.
Other analysts said physical oil could be offered at discounts piling further pressure on the international market, although they said there was uncertainty about the longer term implications.
Saudi Arabia, the world’s leading exporter, has yet to make any comment on the release.
After the Organization of the Petroleum Exporting Countries last month collapsed in disarray without reaching a supply deal, Saudi Arabia had pledged to produce whatever the market needed.
“Saudi Arabia will be crucial -- will it stick to its promise to increase its output to 10 million barrels a day or not?” asked Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
“If they don’t, then the IEA decision will have backfired. Maybe they will scale back production in July after this stock release.”
Emergency reserves are destined for making up for severe supply disruption and some analysts said using them now -- four months after disruption of exports began from war-torn Opec member Libya -- amounted to a change of use.
They said there was a supply shortfall, but anxiety about the fragility of the world economy had been a major consideration.
“Breaking the back of this price spiral was therefore important in so far as some of the recent inflationary gains will now likely be reversed,” Edward Meir, senior commodity analyst, at MF Global in New York wrote in a note.
Brent futures prices reached a peak above $127 a barrel in April this year - still below the all-time high of more than $147 a barrel for US crude hit in 2008.