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The United States is marshaling other nations, challenging OPEC + with the release of oil reserves




  • OPEC + has rejected repeated US calls for more crude oil
  • Biden under political pressure as inflation picks up
  • OPEC + will meet on December 2, but no sign of a change in pace
  • India, UK describes oil release contribution

WASHINGTON, November 23 (Reuters) – The administration of US President Joe Biden announced on Tuesday that it will release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and the United Kingdom, to try to cool prices after OPEC + producers repeatedly ignored calls for more crude oil.

Biden, which is facing low approval ratings amid rising inflation ahead of next year’s congressional elections, has been frustrated by repeatedly asking the Organization of the Petroleum Exporting Countries and its allies, known as OPEC +, to pump more oil without a response.

“I told you before that we are going to take action on these issues. That is exactly what we are doing,” Biden said in comments from the White House.

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“It will take time, but soon you should see the price of gas fall where you fill up your tank, and in the long run we will reduce our dependence on oil when we switch to clean energy,” he said.

Crude oil prices recently reached seven-year highs, and consumers are feeling the pain of the increase in fuel costs. Retail petrol prices have risen by more than 60% in the last year, the fastest increase since 2000, mainly because people have returned to the roads as pandemic-induced restrictions have eased and demand has picked up again.

According to the plan, the United States will release 50 million barrels, equivalent to about two and a half days of US demand. India, meanwhile, said it would release 5 million barrels, while Britain said it would allow the voluntary release of 1.5 million barrels of oil from privately owned reserves.

Japan will hold auctions for around 4.2 million barrels of oil, about 1 or 2 days worth of demand, out of its national stock by the end of the year, the Nikkei newspaper reported on Wednesday.

Details of the amount and timing of oil spills from South Korea and China were not announced. Seoul said it would decide after discussions with the United States and other allies.

The oil price picked up again on Tuesday, after falling for several days when rumors of the plans entered the market. Some analysts also attributed the market’s decline to the lack of fixed details from China, although Reuters reported last week that the country has been working on such a release. Brent oil futures rose 3.3 percent Tuesday to $ 82.31 a barrel.

It was the first time that the United States had coordinated such a move with some of the world’s largest Asian oil consumers, officials said.

OPEC +, which includes Saudi Arabia and other US Gulf allies, as well as Russia, has rejected requests to pump more at its monthly meetings. It will meet again on December 2 to discuss politics, but has so far shown no indication that it will change pace.

The group has struggled to reach existing targets under the agreement to gradually increase production by 400,000 barrels per day (bpd) each month – a pace Washington sees as too slow – and it remains concerned that a resurgence of coronavirus cases could drive again. down demand.

A maze of crude oil pipes and valves is depicted during a tour of the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, USA on June 9, 2016. REUTERS / Richard Carson / File Photo

Recent high oil prices have been caused by a sharp upswing in global demand, which cratered early in the pandemic in 2021, and analysts have said that the release of reserves may not be enough to curb further increases.

“It is not big enough to bring prices down in a meaningful way and could even backfire if it causes OPEC + to slow down the pace at which it increases production,” said Caroline Bain, chief economist at commodities at Capital Economics Ltd.

The administration has also pointed to a remarkable gap between the price of unfinished petrol futures and the retail price of petrol, which has risen to around $ 1.14 per gallon from about 78 cents in mid-October. The White House called on the Federal Trade Commission to investigate last week.

Biden’s political opponents, meanwhile, took issue with the announcement to criticize the administration’s efforts to decarbonize the U.S. economy and discourage the development of new fossil fuels in federal lands.

“Draining the strategic petroleum reserve will not solve the problem. We are experiencing higher prices because the administration and Democrats in Congress are waging a war against American energy,” said Senator John Barrasso, the ranked Republican on the Senate Energy Committee.

The release from the US Strategic Petroleum Reserve will be a combination of a loan and a sale to companies, US officials said. The 32 million barrel loan will take place over the next few months, while the administration will accelerate a sale of 18 million barrels that has already been approved by Congress to raise funds for the budget.

WARNING TO OPEC

Washington’s efforts to team up with major Asian economies to lower energy prices serve as a warning to OPEC and other major producers that they need to address concerns about high crude oil prices, up above 50% so far this year.

“It sends a signal to OPEC + that the consuming nations are not going to be pressured around more of them,” said John Kilduff, partner at Again Capital LLC in New York. “OPEC + has been stingy with their production for several months now.”

Suhail Al-Mazrouei, energy minister in the United Arab Emirates, one of OPEC’s largest producers, said before details of the release of US reserves were announced that he saw “no logic” in lifting the UAE supply to global markets.

An OPEC + source said that the release of reserves would complicate calculations for OPEC +, as it monitors the market on a monthly basis. However, they and several market analysts said that the release was not as large as the headline suggested. They said that the United Kingdom and India issued modest amounts, and that the United States had already announced some releases, and that the additional amount was less than expected.

The United States has historically worked on coordinated share issues with the Paris-based International Energy Agency (IEA), a bloc of 30 industrialized energy-consuming nations.

Japan and South Korea are IEA members. China and India are only associate members.

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Reporting by Timothy Gardner in Washington Further reporting by Sonali Paul in Melbourne, Ghaida Ghantous in Dubai, Ahmad Ghaddar in London, the OPEC team, Jarrett Renshaw in Philadelphia, Alexandra Alper and Jeff Mason in Washington, Jessica Resnick-Ault in New York and Aaron Sheldrick in Tokyo Writing by Edmund Blair, Alexander Smith and Richard Valdmanis Editing by David Gaffen, Carmel Crimmins, Cynthia Osterman and Matthew Lewis

Our standards: Thomson Reuters Trust Principles.



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