Following an unusual request from the U.S. for a coordinated move to cool global energy prices, major oil producing countries said on Thursday they were looking into releasing oil from strategic reserves.
India, Japan, and China have been persuaded by the Biden administration to consider releasing their crude stockpiles. The news triggered a drop in the price of crude oil.
US officials are frustrated that OPEC+ (the Organization of Petroleum Exporting Countries and allies such as Russia) has rejected their requests to speed up oil supplies in the wake of the pandemic.
Joe Biden is under pressure as gasoline prices and other costs continue to rise ahead of next year’s midterm elections. 67% of US adults agreed that inflation concerns them, according to a poll in October.
On December2, OPEC+ will have a meeting. The group took a more cautious approach to increasing output, believing that the economic recovery is too fragile to justify more supply.
On Thursday, oil prices fell by about 4% to a six-week low after Reuters reported the US request and China’s decision to release crude. Oil prices have fallen from recent highs as global supply grows.
China’s state reserve bureau said it was working on releasing crude oil reserves but declined to comment on the US request.
With over 600 million barrels, the US has the largest strategic reserve. After the Arab Oil Embargo in the 1970s, the US Strategic Petroleum Reserve (SPR) was established to ensure emergency supplies. The shale boom has pushed US output to rival Saudi Arabia and Russia.
This proposal challenges OPEC, that has influenced oil prices for over 50 years, by involving China for the very first time. The world’s second-largest oil consumer and importer.
OPEC Secretary General Mohammad Barkindo said this week that OPEC expects an oil supply surplus to begin to build next month. For the first time since January, Saudi Arabian exports reached 6.52 million barrels per day in September. But an anonymous OPEC source said that it would be surprising for consuming countries to lower prices rather than to meet a supply shortage.
Several major energy consumers around the world, however, have pushed OPEC to increase supply. To stabilize prices, China decided to release reserves in September. Overwhelmed by rising Saudi Arabian prices, India has been vocal about its dissatisfaction for months.
The United States has contacted Japan and South Korea about releasing reserves. China is the first country to do so in coordination with other nations, analysts say. The United States did not ask the European Union for its participation, a source says. Europe’s primary problem has been related to higher natural gas prices, the source adds.
Original source material for this article taken from here