An image of the Martinez Marathon Refinery. Credit: CrystalMage/Shutterstock 
Oil tumbled on signs the U.S. is considering tapping its reserves again in a potentially massive release aimed at managing inflation and supply shortages following Russia's invasion of Ukraine.
Futures in New York fell as much as 7.1%, wiping out Wednesday's gains. The Biden administration is weighing a release of roughly 1 million barrels a day for several months, according to people familiar with the matter. Meanwhile, the OPEC+ group of producers agreed to another modest output hike for May.
The total U.S. reserve release could be as much as 180 million barrels, the people said, providing relief to a market that's tightened significantly amid the war in Ukraine. The invasion has fanned inflation and led to wild volatility across commodity markets, with global benchmark Brent crude set for the widest trading range on record this month.
The U.S. plans are accompanied by a diplomatic push for the International Energy Agency to coordinate a global release. A final decision hasn't been reached on that yet, but the White House may make an announcement on the U.S. release as soon as Thursday, one of the people said.
A large release from America "would reduce the amount of necessary price-induced demand destruction," Goldman Sachs Group Inc. analyst Damien Courvalin wrote in a note to clients. "This would remain, however, a release of oil inventories, not a persistent source of supply for coming years."
President Joe Biden has already ordered two releases of oil from U.S. reserves in the past six months, but that's done little to tame rampant prices. He's also called on OPEC+ to raise oil output faster, but Saudi Arabia and the United Arab Emirates said this week that the U.S. must trust the group's supply strategy.
The Organization of Petroleum Exporting Countries and its partners ratified the 432,000 barrel-a-day supply increase scheduled for May at a meeting on Thursday. The alliance beat its own record for brevity, wrapping up the online gathering in 12 minutes.
On the demand side, the market is facing possible weakness as China tackles a virus resurgence. The nation has initiated a string of lockdowns to curb its spread, including in Shanghai, which is starting to affect the economy. China's manufacturing activity contracted this month.
Elizabeth Low and Alex Longley report for Bloomberg News.
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