The United States is expected to announce a crude loan from its emergency stockpile on Tuesday as part of a plan to lower energy prices with major Asian energy consumers, which may be affected by the situation. said a Joe Biden administration source familiar.
The move comes after the OPEC producer group and its allies turned down repeated requests from Washington and other consumer countries to pump more quickly to meet rising demand. .
US President Joe Biden is facing a low approval rating due to high prices of gasoline and other consumer goods in his recovery from the coronavirus pandemic, which threatens him and his Democratic Party ahead of next year’s congressional elections.
The source said a so-called “swap” from the US Strategic Petroleum Reserve (SPR) would be announced on Tuesday in coordination with several countries. The source did not specify how much oil would be released from the reserves.
Biden has already asked China, India, South Korea and Japan to issue strategic oil stocks in conjunction with the United States. Japanese and Indian officials are working on ways to do this, Reuters reported.
The unprecedented effort by Washington to slash energy prices in tandem with major Asian economies comes as a warning to major producers that they must pump more oil to address concerns of higher fuel prices in powerhouse economies.
OPEC, a grouping of allies including the Organization of the Petroleum Exporting Countries (OPEC) and Russia, is planning to meet on December 2 to discuss production policy.
The impact of a coordinated oil release will depend on the time frame and volume, but a release of more than about 60 million barrels in about 30 days would be seen by the market as “very negative for pricing”, Commonwealth Bank of Australia analysts said. Vivek said Dhar.
“This situation is coming at a time when this market was changing and global oil reserves were rising. So it could lead to prices falling faster than you think,” he pointed to the new coronavirus lockdown in Europe said.
oil off high
The United States has historically worked with the Paris-based International Energy Agency (IEA), a grouping of 30 industrialized energy-consuming countries, when global supply issues demand a coordinated release of stocks.
Japan and South Korea are members of the IEA, while China and India are the only associate members.
Under SPR swaps, oil companies take crude oil out of reserves, but are required to return it — or the refined product — and interest. Swaps are typically offered when oil companies face supply disruptions such as pipeline outages or storm damage.
Outright sales are less common.
US presidents have authorized emergency sales from the SPR three times, most recently in 2011 during the war in OPEC member Libya. Sales also went up during the Gulf War in 1991 and after Hurricane Katrina in 2005.
The current high prices are not caused by supply disruptions, but a rebound on global energy demand during the lockdown in the early days of the coronavirus crisis.
OPEC is adding about 400,000 barrels per day to the market on a monthly basis to meet rising demand, but has resisted Biden’s calls for faster growth, arguing that the rebound in demand could be fragile.
New coronavirus-related lockdowns in Europe as well as the threat of a coordinated release of stockpiled oil into the market have fueled the recent rally of crude. Brent crude was last trading around $79.30 a barrel, down more than $7 from its high at the end of October. [O/R]
Citigroup analysts estimate that a combined release of oil from the United States and other countries could be “on the order of 100-120 million bbl or more”.
However, a source familiar with the discussions said that inputs from China and other countries are still very much up in the air, and countries such as India and South Korea will likely contribute a small amount of barrels.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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