28 countries to release crude

Crude oil prices tumbled Thursday on fresh news of U.S. economic weakness and a pledge by 28 countries to release 60 million barrels of oil from strategic reserves. And stocks fell sharply on news of a rise in U.S. unemployment claims; the Dow Jones industrials was off more than 200 points early in the day before making a slight comeback. Oil company stocks from BP in Britain to Total in France and ExxonMobil in the U.S. were all marked down heavily in the wake of the oil news, adding to the already depressed mood in stock markets. The mood has been downbeat since Wednesday's warning from Federal Reserve chief Ben Bernanke that the problems plaguing the U.S. economy "may be stronger and more persistent" than originally thought. However, Bernanke gave no indication the central bank will back another monetary stimulus after the current $600 billion program runs out at the end of the month. The International Energy Agency, based in Paris, warned that the tight oil market "threatens to undermine the fragile global economic recovery" by forcing individuals and businesses to spend more on energy and less on other goods and services. It said it made the move because normal increase in demand over the summer "will exacerbate the shortfall further" and pledges by some oil producers to boost ouput will take a while to have an effect. The Obama administration decided to release 30 million barrels of oil from the country's Strategic Petroleum Reserve, about half the total. "We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said Thursday. White House officials would not predict how release of the oil will affect gasoline prices at the pump. On the New York Mercantile Exchange, light, sweet crude for August delivery fell more than $4 a barrel to around $91 a barrel. Oil's most recent high was $113.93 a barrel in April. The slowing U.S. recovery was evident in figures Thursday that showed the number of Americans applying for unemployment rose 9,000 last week to 429,000, while new home sales fell 2.1%. "As the Fed says, housing remains depressed," said Sal Guatieri, senior economist at BMO Capital Markets. "It's likely to stay that way until job growth picks up, and the latest jobless claims figures are far from encouraging." The 28 members of the IEA — mainly oil-importing countries in Europe — will make 2 million barrels a day available from their emergency stocks over an initial period of 30 days. Months of fighting in Libya have removed 132 million barrels of light, sweet crude oil from the market by the end of last month, the agency estimated. Prices have been high in recent months. They eased this week, to below $93 a barrel on Thursday, due to concerns that U.S. economic growth and crude demand will weaken. Demand growth in China, the world's second-largest oil consumer, has also slipped slightly but remains robust.