PARIS/WASHINGTON: Industrialized nations agreed to release oil from emergency stockpiles for the third time in history, sending crude prices tumbling and providing some support to a faltering global economy. The unexpected decision to release 60 million barrels over the next month, enough to boost world oil supply by 2.5 percent, showed the deepening concern among Western leaders over the damage of high-energy costs to a worsening global economy. Asian countries also moved to release emergency oil stockpiles Friday as part of a rare global coordinated action by consumer countries to prevent high-energy prices from stunting a stuttering economic recovery. The move, led by Washington and criticized by the oil industry as an unnecessary distortion of markets, suggests a fundamental shift on the part of industrialized nations toward intervention in commodity markets as an economic policy tool. Oil's sharp sell-off paused Friday as the impact of a surprise announcement of emergency fuel stocks from consumer nations faded. Brent crude futures eased 54 cents to $106.72 a barrel by 1308 GMT, while US crude futures recovered 24 cents to $91.26. Brent oil prices tumbled to a four-month closing low Thursday and after rallying early on Friday, turned and fell again. Some doubts emerged that the unexpected decision by the International Energy Agency to release 60 million barrels over the next month would have a long-term impact. Japanese Economics Minister Kaoru Yosano said the IEA move was a warning to speculative buyers but India's Oil Minister S. Jaipal Reddy doubted the action would have an impact. "Even if there is a slight increase in production (supply), those gains will not be made available to us because of unbridled speculation in the financial markets of the world," he said. "We don't know whether this (weaker oil prices) is a stable trend." The stock release is only the third in the 37-year history of the agency that was set up as a counter weight to exporting group OPEC. IEA Asian members Japan and Korea said that from next week they will start releasing oil reserves in line with the agency's targets. Japan will cut the reserve requirement for oil companies by 7.9 million barrels over the next 30 days and South Korea will release 3.46 million barrels, together providing about 19 percent of the IEA target. Australia and New Zealand, the remaining members from the Asia-Pacific region of the 28-nation grouping, are not participating. It also suggests a fundamental shift by oil-importing nations over how they use their emergency reserves, one that threatens to inject new uncertainty into oil markets that may face more frequent government intervention, and widen a rift with OPEC just weeks after the cartel failed to raise output. "It represents a reach by member countries for the remedy of last resort to high oil prices," said John Kilduff, partner with Again Capital LLC. The decision risks aggravating OPEC and depleting emergency reserves of oil-importing nations, leaving them with less ammunition should a deeper supply crisis emerge. It drew immediate criticism from the oil industry, who called it an ill-timed misuse of stockpiles. Oil prices have risen 20 percent over the past year, pushing retail gasoline prices in the United States to $4 a gallon. While Brent crude peaked at $125 at the end of April, it has since fallen sharply. After dropping a further 6 percent on Thursday, prices are only a little higher than mid-February, just before the Libyan conflict began. Lower energy prices should provide relieve for the sluggish US economy, where household budgets have been constrained by high gas prices. Chris Low, economist at FTN Financial in New York, said the decline in oil prices should put more spending power into US consumer pockets and help deliver growth in the 2.5-3.0 percent range later this year, up from 1.8 percent seen in the first quarter. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy," said IEA Executive Director Nobuo Tanaka.
