Thailand's legal reserve of refined oil will be reduced to 1% or 3.6 days from 6% or 22 days at present, says an Energy Ministry source.
However, crude oil reserves will be kept unchanged at 6%, the source said yesterday.
As a result, the new total oil reserve of both refined and crude oil will be trimmed to 25.6 days.
The source said the final decision on the new oil reserve and the effective date of implementation would be discussed again at Thursday's meeting of the National Energy Policy Council (NEPC).
The idea to reduce the country's oil reserve follows the collapse in global oil prices, which had cut the risk of an oil shortage as the falling prices reflected an oversupply, the source said.
The risk of an oil shortage is less than in recent years, as crude oil supply is surpassing demand.
The source said the risk of a shortage of refined oil was much less than that for crude oil, so energy policymakers decided to reduce the reserve of refined oil.
"We expect the oversupply situation will last longer, as the US will not import crude oil and will consume its own oil and gas resources," the source said.
"Moreover, oil suppliers say they will continue to produce the current volume of oil."
The source said global oil supply would be substantially higher than demand.
However, six oil refineries in Thailand are maintaining strong facility management for storing oil to relieve concerns about a supply shortage.
The source said the cut in the oil reserve would help to reduce the burden of oil companies and trim retail oil prices by nearly 10 satang a litre.
Thailand increased its reserves of crude and refined oil from 18.2 days for each type to 22 days in November 2013 in order to secure oil supply amid spiralling global oil prices at a time of rising political tension in oil-producing countries, increasing concerns about a possible oil shortage.
The source said the country's oil reserve was flexible and could be increased if global oil prices swung back to a risky point where they had reached such a high level that fears were raised about a shortage.
In 2012, Thailand planned to secure oil supply of up to 90 days from 36.5 days previously after a co-study with the International Energy Agency, but the plan was shelved because it required a huge investment in oil stockyards.
The source said the NEPC's meeting on Thursday would also discuss the issue of the expiry of concessions for gas production fields in the Gulf of Thailand held by Chevron (Thailand) and PTT Exploration and Production.
The source said oil retailers were unlikely to cut retail prices by 10 satang immediately after implementation of the new oil reserve, as gains from a smaller reserve would offset financial losses incurred from the higher stocks they had to bear previously when the reserve was fixed as high as 44 days.