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NEW YORK ( TheStreet) -- The International Energy Agency's decision to release emergency crude stockpiles at this particular time should have maximum impact on lowering oil and gasoline prices.
Texas light sweet crude oil was dropping by $5 to $90.41 a barrel and the September Brent crude contract was falling $5.05 to $108.71.
"I think the timing was perfect," said Phil Flynn, PFG Best's senior energy analyst. "If you're going to release oil from the reserve -- if you do it after a lot of weak economic data out of China, more concerns out of the European economy, and a day after [another Fed confirmation of the end of] quantitative easing , I think this is going to have the maximum effect on price."
Flynn, whose oil price target is around $85, believes that the IEA will be releasing higher quality oil that refiners can more easily refine. In Europe for instance, it's not an issue of not having enough oil -- it's an issue of not having enough high quality oil.
The analyst says the IEA's move should also, with the help of a potential increase in imports into the New York Harbor, lower gasoline prices.
The IEA announced on Thursday that its 28 members have agreed to make 2 million barrels of oil a day available from their emergency stocks over an initial period of 30 days in response to the ongoing disruption of oil supplies from Libya. That's about 60 million barrels of oil in the coming month.
The IEA estimates that the civil war in Libya has taken 132 million barrels of light sweet crude oil offline by the end of May. Libyan supplies have been off the market since February.
Analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011.
"As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market," the IEA said in a statement. "The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets."
Oil services companies were losing ground.
Halliburton(HAL - Get Report) was falling 3% to $45.70,
Schlumberger(SLB - Get Report) was slumping by 3.3% to $80.84,
Baker Hughes(BHI - Get Report) was falling by 3.2% to $68.44,
Tesco(TESO - Get Report) was down 3.1% at $17.78,
National-Oilwell Varco(NOV - Get Report) was tumbling 2.5% to $70.32,
Weatherford International(WFT - Get Report) was losing 2.7% at $17.44 and
Lufkin(LUFK) was lower by 3.1% to $78.49.
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-- Written by Andrea Tse in New York.
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