This marks only the third time in its history that the Paris-based agency has released oil onto the markets. Half of the 60 million barrels will coAme from the U.S.'s emergency stocks. The oil will be released over the next 30 days.
Oil prices spiked beginning in late February when violence in Libya shut down that country's 1.5 million barrels of daily oil output. Many of the IEA's members are major oil-importing nations in Europe that rely on imports from Libya and countries in the Middle East to power their economies. With Libya's oil supplies likely unavailable for at least the remainder of this year, and the global demand for oil expected to increase in the summer, the IEA said it was concerned that the tightening of oil supplies threatened to "undermine the fragile global economic recovery."
The IEA's action comes two weeks after the Organization of Petroleum Exporting Countries failed to agree to boost oil production. At the time, the IEA said it was disappointed by OPEC's lack of response to rising oil prices.
Oil fell sharply Thursday. The benchmark for the U.S., West Texas Intermediate fell $4.51, or 4.8 percent, at $90.90 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $7.02, or 6.2 percent, at $107.19 per barrel on the ICE Futures exchange.
Michael Lynch, president of Strategic Energy & Economic Research said the release of oil will likely depress prices temporarily. But he's doubtful it will have a long-term impact.
"It creates an immediate glut (of oil)," he said "But they're not solving the problem."
If oil demand continues to rise to historic levels this year, oil suppliers will continue to have trouble keeping up, Lynch said.
To meet its commitment, the U.S. will release 30 million barrels of oil from the U.S.
Strategic Petroleum Reserve, which currently holds 727 million barrels in underground caverns along the Gulf Coast.
The IEA announcement came amid further indications of a slow economic recovery in the U.S. Federal Reserve Chairman Ben Bernanke on Wednesday warned that some problems - in the financial and housing sectors - would linger into next year. And on Thursday the Labor Department reported an increase in applications for unemployment benefits.
Meanwhile, retail gasoline prices in the U.S. dropped for the 20th consecutive day, down a penny from Wednesday, to $3.612 per gallon, according to AAA, Wright Express and Oil Price Information Service. That's about 21 cents lower than a month ago.
In other Nymex trading, heating oil fell 14 cents, or 4.8 percent, to $2.8266 per gallon and gasoline futures lost 14 cents at $2.7891 per gallon. Natural gas gave up 12 cents at $4.197 per 1,000 cubic feet.