Oil Prices Start Falling As U.S., China Use Reserves

The price of oil has shot up this fall, boosting profits for major producers but hurting the wallets of drivers who need to fill up their tanks. Just a few days back, gas prices in California hit their highest level ever.

Photo Insert: Oil pumping in Central California Valley

This week, however, some of the pressure has started to lift, Julia Horowitz reported for CNN Business.

What's happening: West Texas Intermediate futures, the US benchmark for oil prices, and Brent futures, the global benchmark, are now trading at their lowest levels in six weeks on signals that supply constraints could begin to ease soon. In the US, prices fell sharply Wednesday after oil inventories at a key hub in Cushing, Oklahoma rose for the first time in weeks.

But Bjornar Tonhaugen, head of oil markets at the consultancy Rystad Energy, argued the biggest factor driving prices right now is the expected release of strategic reserves from the US and China.

According to the White House, US President Joe Biden and Chinese President Xi Jinping discussed the "importance of taking measures to address global energy supplies" during their virtual summit this week. That sparked chatter about a coordinated move initiated by the White House to put millions of barrels of oil on the market.

Thursday brought some signs that China is taking action. Reuters reported that the country's state reserve bureau said it was working on a release, though the exact details remain murky.

A spokesperson for China's National Food and Strategic Reserves Administration told CNN on Friday that it was "pushing forward with crude oil release-related work at the moment," but declined to comment on whether it was in response to a US request to work together to tackle the supply crunch.

Based on current price moves, Tonhaugen said, investors are expecting between 20 million and 30 million barrels to come online in the next month. That could be from the United States and China together, or through broader action coordinated by the International Energy Agency.

He emphasized, however, that the release of strategic reserves won't change the overall picture for long.

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