Oil tankers are seen at a terminal of Sinopec Yaogang oil depot in Nantong, Jiangsu province, China June 11, 2019.
Oil tankers are seen at a terminal of Sinopec Yaogang oil depot in Nantong, Jiangsu province, China June 11, 2019. Reuters / CHINA STRINGER NETWORK

Oil futures fell sharply on Wednesday following a surprising rise in U.S. crude stocks and after large consuming nations said they would release oil from reserves in conjunction with the United States to counter tightening supply.

Member states of the International Energy Agency (IEA) will release 120 million barrels from strategic reserves, including 60 million from the United States, according to two sources familiar with the matter. That U.S. 60 million commitment is part of Washington's previously announced plans to release a million barrels a day for the next six months for a rough total of 180 million barrels.

This is the second time the IEA, which includes big consumers like Japan, France and South Korea, has released barrels from its reserves this year. The group collectively has about 1.5 billion barrels in strategic reserves.

Brent crude futures fell $2.78, or 2.7%, to $103.86 as of 12:31 p.m. EST (1631 GMT). U.S. crude fell $2.93, or 2.9%, to $99.04 a barrel.

Crude markets have been through weeks of volatility, with prices surging on supply concerns after Russia's invasion of Ukraine and subsequent sanctions on Moscow by the United States and its allies.

Lately the market has been pulling back following reserve releases along with worries of slowing demand in China, where a resurgent pandemic has prompted lockdowns of cities including Shanghai.

U.S. crude stocks rose by 2.4 million barrels in the latest week, the U.S. Energy Information Administration said, while analysts had expected a drawdown. Output also rose, hitting 11.8 million barrels a day, most since late 2021, and output is expected to continue rising. The United States also released nearly 4 million barrels from its strategic reserve in the week.

"The SPR release was huge which does raise confidence that they can move a lot out of the reserve on a weekly basis," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The United States and allies on Wednesday prepared new sanctions on Moscow over civilian killings in Ukraine, which President Volodymyr Zelenskiy described as "war crimes." Russia denied targeting civilians.

The 27 member states will decide whether to approve proposed EU sanctions that would ban buying Russian coal and prevent Russian ships from entering EU ports.

The head of the EU's executive Ursula von der Leyen said the bloc was working on additional sanctions, including on oil imports.

Britain urged G7 and NATO nations to agree a timetable to phase out oil and gas imports from Russia.