Oil near six-week low as China readies crude reserve
release
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[November 18, 2021] By
Noah Browning
LONDON (Reuters) - Oil prices slid to
six-week lows on Thursday before recovering some ground, as China said
it was moving to tap reserves after a Reuters report that the United
States was asking large consuming nations to consider a stockpile
release to lower prices.
The bid by the U.S. to cool markets, asking China to join a coordinated
action for the first time, comes as inflationary pressures - partly
driven by surging energy prices - start to produce a political backlash.
Brent crude was down 42 cents, or 0.5%, to $79.86 a barrel by 1217 GMT,
after earlier dropping to $79.28, the lowest since Oct. 7.
U.S. West Texas Intermediate crude futures were down 64 cents, or 0.8%,
at $77.72 a barrel, having fallen earlier to $77.08, also the lowest
since early last month.
"Judging by the mild negative reaction in prices today, the market seems
to be expecting a limited (Chinese SPR release)," Rystad Energy head of
oil markets Bjornar Tonhaugen said.
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"What happens from here remains highly uncertain", Tonhaugen added,
noting that a coordinated release among major consuming nations "would
definitely add extra bearish weight on prices".
Prices hit seven-year highs in October as the market focused on the
swift rebound in demand that has come with the lifting of lockdowns to
halt the spread of the coronavirus.
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A pump jack stands idle in Dewitt County, Texas January 13, 2016.
REUTERS/Anna Driver
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The rally was fuelled in part by the strategy of the Organization of the
Petroleum Exporting Countries (OPEC) and its allies, called OPEC+, to raise
output only slowly.
The International Energy Agency and OPEC have said in recent weeks that more
supply will be available in the coming months.
But the proposed release of reserves represents an unprecedented challenge to
OPEC, because it involves top importer China.
China's state reserve bureau said it was working on a release of crude oil
reserves although it declined to comment on the U.S. request.
A Japanese industry ministry official said the United States had requested
Tokyo's cooperation in dealing with higher oil prices. By law, Japan cannot use
reserve releases to lower prices, the official said.
A South Korean official confirmed the United States had asked Seoul to release
some oil reserves and it was reviewing the request but added that it could only
release crude in case of a supply imbalance.
(Additional reporting by Aaron Sheldrick; Editing by Peter Graff, Elaine
Hardcastle)
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