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Asia wants to release oil reserves at the request of the US

© Reuters. FILE PHOTO: A crude oil is seen in Qingdao port, Shandong province, China, on April 21, 2019. REUTERS / Jason Lee / Photo File

By Timothy Gardner and Chen Aizhu

SINGAPORE / WASHINGTON (Reuters) – Governments in the world’s largest economies were considering releasing oil from their strategic reserves on Thursday, following and before a rare request by the United States for a coordinated move to cool global energy prices. meeting of major oil-producing countries.

The Biden administration has asked large oil buyers like India and Japan – and even China for the first time – to consider releasing crude stocks, several people who knew the demands told Reuters on Wednesday.

As the world economy bounces off the pandemic, Washington is frustrated that OPEC + producers, the Organization of the Petroleum Exporting Countries and allies like Russia have rejected requests to speed up the U.S. oil supply. As gasoline prices and other costs are rising, U.S. President Joe Biden must also face political pressure ahead of next year’s midterm elections.

OPEC + plans to meet on December 2. The group has deliberately done to boost production, given that the economic recovery is too fragile to justify further supply.

Oil prices fell about 4% to a six-week low after Reuters reported on a US demand and a decision by China to release crude, before reclaiming some land on Thursday. Oil prices have fallen back from the last level as world supplies rise.

“Brent now has less than $ 80,” said John Driscoll, managing director of JTD Energy consulting in Singapore. “It’s having a short-term impact on the oil markets. It’s probably good to make at least a 5% correction.”

The Chinese State Reserve Bureau told Reuters that it was working to release crude oil reserves, but declined to comment on the U.S. request.

The United States has the largest strategic reserve of more than 600 million barrels. The U.S. SPR was created in the 1970s after the Arab Oil embargo to ensure the nation had adequate supplies to deal with an emergency. In recent years, the shale boom has pushed U.S. production against Saudi Arabia and Russia.

CHALLENGE to OPEC

Involving China for the first time, this proposal is an unprecedented challenge for OPEC, a cartel that has had an impact on oil prices for more than five decades. China is the world’s 2nd largest oil consumer and importer.

There was no immediate official reaction from OPEC + members. The group is raising production by 400,000 barrels a month, gradually dismantling production cuts made in 2020 when the pandemic sank its fuel demand.

This week, Secretary-General Mohammad Barkindo said he hoped OPEC would begin building surplus oil supplies next month.

An OPEC source who asked for the nomination said it would be surprising for consumer countries to release stocks at low prices instead of filling supply shortages.

However, several major energy consumers around the world are pushing for OPEC to boost supply. China chose to release reserves in September to try to stabilize prices. India has expressed frustration over the past few months, significantly reducing purchases from Saudi Arabia in the spring as a result of rising costs.

‘Someone can turn around and say,’ Well, if I’m a producing country, why don’t I take advantage of high prices? ‘ Well, you can. It’s your choice: you’re an independent country, you’re a member of a cartel, ”Indian Oil Minister Hardeep Singh Puri said in a speech in Dubai on Wednesday. “This is not the case where supplies are not available. There are 5 million barrels of supplies available every day that are not released for any reason.”

The US and the future have fled after the US government asked some big oil buyers to sell the reserves https://fingfx.thomsonreuters.com/gfx/ce/mopanloklva/USvsBrentNov182021.png

ENTERING CHINA, OUTSIDE IEA?

The United States and its allies have previously coordinated the release of strategic oil reserves, for example, in 2011, when a war in Libya, an OPEC member, hit supplies. This coordination has been managed by the Paris-based International Energy Agency, of which the United States, Japan and many European nations are members.

The United States, however, has not asked the European Union for its participation, according to a well-known source in the discussions, saying that Europe’s main problem has been linked to high prices.

The IEA, on its website, said the notes are not intended to interfere with pricing. They contacted Japan and South Korea with the U.S., and both said they are not releasing reserves just to deal with rising prices.

If China is making the release in coordination with other nations, it would be the first time, said Sengyick Tee, an analyst at SIA Energy Consulting in Beijing.

oil in Strategic Oil Reserves https://fingfx.thomsonreuters.com/gfx/ce/klpykdleepg/USCrudeSPRNov2021.png




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