Exclusive: US asks Japan, China, others to consider draining oil reserves – sources

An oil storage tank and crude oil pipeline equipment is seen during a tour of the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, USA on June 9, 2016. REUTERS / Richard Carson

WASHINGTON, Nov. 17 (Reuters) – The Biden administration has asked some of the world’s largest oil-consuming nations – including China, India and Japan ̵[ads1]1; to consider releasing crude oil stocks in a coordinated effort to lower global energy prices, according to several people familiar with the matter. .

The unusual request comes as US President Joe Biden averts political pressure over rising pump prices and other consumer costs driven by a decline in economic activity from downturns struck in the early coronavirus pandemic.

It also reflects US frustration with members of the Organization of the Petroleum Exporting Countries and its allies who have rejected repeated requests from Washington to speed up their production increases.

“We are talking about the symbolism of the largest consumers in the world who are sending a message to OPEC that ‘you need to change your behavior,'” said one source.

Oil prices declined in the news after falling further below the seven-year highs in early October.

Biden and top aides have discussed the possibility of a coordinated release of stored oil with close allies, including Japan, South Korea and India, as well as with China, in recent weeks, the sources said.

Tokyo responded positively to the first contact, according to one of the sources. It was not immediately clear how others had reacted.

The US share of any potential release of reserves must be more than 20 million to 30 million barrels to affect markets, according to a US source who participated in the discussions. Such a release may take the form of a sale or a loan from the US Strategic Petroleum Reserve – or both.

The SPR was established in the 1970s following the Arab oil embargo to ensure that the United States has sufficient supplies to cope with an emergency.

Several people familiar with the case warned that negotiations on a coordinated supply release have not been completed, nor has a final decision been made on whether to follow any specific courses of action for the oil price.

The White House declined to comment on the detailed content of talks with other countries.

“No decisions have been made,” a White House spokesman told the National Security Council.

For several weeks, the White House has said it is “talking to other energy consumers to ensure that global energy supply and prices do not jeopardize the global economic upswing,” the spokesman added.

After Reuters reported on the White House discussions, US crude oil futures traded at $ 78.18, down from a close of $ 78.36 a barrel, while Brent fell to $ 80.21 after ending at $ 80.28 a barrel.

Before the news, both the US crude oil and global benchmark index Brent had their lowest settlement prices since the beginning of October, with Brent down 1.7% and US crude down 3% for the day.

OPEC, led by Saudi Arabia and its allies led by Russia, have added around 400,000 barrels per day to the market on a monthly basis, but have resisted Biden’s demand for faster increases, arguing that the rise in demand could be fragile.

OPEC Secretary-General Mohammad Barkindo said on Tuesday that he expected a global supply surplus to emerge as soon as December.

“These are signals that we need to be very, very careful,” he told reporters.

Rising oil prices have irritated Biden ahead of the midterm elections in 2022, which will determine whether his Democratic Party maintains its slim majority in the US Congress.

US gasoline prices average $ 3.41 per gallon now, according to AAA, more than 60% higher than a year ago as the economy has recovered from the COVID-19 pandemic.

Several Biden assistants attribute his declining public approval ratings in recent months to worsening inflation from energy to food and other areas. The consumer price index has been up 6.2% in the last 12 months, with the energy components up 30%.

The Paris-based International Energy Agency, an energy watchdog that includes some of the largest consumers of oil, including the United States, Japan and a number of European nations, did not comment. The IEA has previously coordinated publications involving several countries.

“The IEA closely monitors the oil market and is ready to act as needed,” the statement said.

Reporting by Trevor Hunnicutt, Jarrett Renshaw and Tim Gardner; Additional reporting from Valerie Volcovici in Washington, Noah Browning in London and Nidhi Verma in New Delhi; writing by Richard Valdmanis; Edited by David Gaffen, Heather Timmons and David Gregorio

Our standards: Thomson Reuters Trust Principles.

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