The United States will release 50 million barrels of oil from the reserves

President Joe Biden has announced the release of oil from the US strategic stockpile in an attempt to drive down gas prices and stop a crude oil market upswing that the administration has said poses a threat to the global economic upswing.

On Tuesday, the president approved the release of 50 million barrels of oil – about 2.5 days worth of US oil consumption – “in the coming months”, in a move coordinated with China, India, Japan, South Korea and the United Kingdom.

“The bottom line: today we are launching a major effort to moderate the price of oil ̵[ads1]1; an effort that will span the globe within reach and eventually reach your cornerstone station, God willing,” Biden told reporters Tuesday afternoon.

But efforts to push down oil prices, which have doubled in the past year, seemed to backfire when Brent, the international crude oil reference, closed 3.3 percent higher at $ 82.31 a barrel on Tuesday.

In Asian trade on Wednesday, Brent was slightly changed to 82.34 dollars a barrel, while the American marker West Texas Intermediate rose 0.2 percent to 78.71 dollars.

The administration first flagged the possibility of exploiting the strategic reserve at a Financial Times conference last month, when Jennifer Granholm, the US Secretary of Energy, said a release was “under consideration”.

Saudi Arabia, Russia and other members of the OPEC + group of oil exporters have rejected repeated US requests to increase supply.

The oil price increases came as traders calculated that the total volume to be released would be less than expected, and that Opec + could reciprocate by holding back more oil than planned. Opec did not respond to requests for comment.

Line chart of West Texas Intermediate ($ / barrel) showing US oil prices has climbed as the world emerges from the pandemic

The Global Times, a nationalist tabloid in China, described Beijing’s participation as nonsense for Biden, adding that the United States “must seriously consider how to come to terms peacefully with China.”

Analysts said it was the first time in recent history that Beijing participated in such an effort. “The million dollar question is how OPEC + can react to this move,” said Bjørn Tonhaugen, head of oil markets at Rystad Energy in a note. “If the move is seen as aggressive… The group could in theory even cut supply into January to maintain profits.”

It would be the largest release of crude oil from the US strategic petroleum reserve – an emergency stockpile created after the 1970s oil crises – that surpasses the barrels distributed when the civil war in Libya caused a rise in crude oil prices in 2011.

Analysts said it was unlikely to have that effect on prices Biden hoped it would, and that there was an abuse of the emergency reserve.

Britain will emit 1.5 million barrels and India will emit 5 million barrels. Volumes from other countries have not yet been confirmed.

The United States will release 32 million barrels “in the next few months” as part of a stock exchange that will allow it to replenish stocks later. The other 18 million barrels to be released involve an accelerated sale of oil that has already been approved by Congress and is expected by the market.

Biden is facing increasing political pressure to curb gas prices – up 60 percent in the last 12 months – and other sources of high inflation, which have hit the approval ratings of both the president and other Democrats in Congress heading into next year’s midterm elections.

On Tuesday, Granholm tried to blame the high prices on American oil producers, which she said had “enormous profits” and failed to increase production sufficiently in the wake of the coronavirus pandemic.

Last week, Biden called on the Federal Trade Commission, the competition watchdog, to crack down on price cuts in the sector.

The International Energy Agency, the watchdog of oil-consuming nations that previously coordinated oil spills, was not part of the White House announcement. Some members, including Germany, were opposed to an IEA-wide release, according to a person familiar with the matter.

The agency said it acknowledged that the rise in oil prices had placed a burden on consumers and increased inflationary pressures and “respect[ed] the assessments and decisions made by individual IEA member and partner countries on how best to respond ».

Further reporting by Jim Pickard in London, Amy Kazmin in New Delhi and Hudson Lockett in Hong Kong

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