Asia looks to release oil reserves after U.S. request
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[November 18, 2021] By
Heekyong Yang and Aaron Sheldrick
TOKYO (Reuters) - The world's biggest
economies said on Thursday they were looking into releasing oil from
their strategic reserves, following a rare request from the United
States for a coordinated move to cool global energy prices.
The U.S. move reflects frustration with the Organization of the
Petroleum Exporting Countries (OPEC) and allies such as Russia who have
rebuffed Washington's requests to speed up oil production as the world
economy rebounds from the pandemic.
It also comes as U.S. President Joe Biden fends off political pressure
ahead of midterm elections next year over rising gasoline prices and
other costs driven by the recovery.
The Biden administration has asked
https://www.reuters.com/business/energy
/exclusive-us-asks-big-countries-coordinate-releases-oil-reserves-sources-2021-11-17
big oil buyers such as India and Japan - as well as China for the first
time - to consider releasing stocks of crude, several people familiar
with the requests told Reuters.
Oil prices sank about 4% to a six-week low after Reuters reports about
the U.S. request and China's decision to release some crude, before
recovering some ground later on Thursday. [O/R]
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"Brent is now under 80 bucks," said John Driscoll, managing director at
consultancy JTD Energy in Singapore. "It's having a short-term effect on
oil markets. It's probably good for at least a 5% correction."
China's state reserve bureau told Reuters it was working on a release of
its crude oil reserves, although it declined to comment on the U.S.
request.
A Japanese industry ministry official said Washington had requested
Tokyo's cooperation in dealing with higher oil prices but he could not
confirm whether the request included a coordinated releases of reserves.
By law, Japan cannot release reserves to lower prices, the official
said.
U.S. & Brent crude oil futures slip after U.S. govt requests that some
big oil buyers sell reserves
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mopanloklva/
USvsBrentNov182021.png
UNPRECEDENTED CHALLENGE
A South Korean official confirmed the United States had asked Seoul to
release some oil reserves.
"We are thoroughly reviewing the U.S. request, however, we do not
release oil reserve because of rising oil prices. We could release oil
reserve in case of supply imbalance, but not to respond to rising oil
prices," the official said.
The United States and its allies have coordinated strategic petroleum
reserve releases before, such as in 2011 when supplies were hit by a war
in OPEC member Libya.
But because the current proposal involves China for the first time, it
represents an unprecedented challenge to OPEC, the cartel that has
influenced oil prices for over five decades.
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![](../images/111821PIX/busine48.jpg)
A crude oil tanker is seen at Qingdao Port, Shandong province,
China, April 21, 2019. REUTERS/Jason Lee/File Photo
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The U.S. SPR
https://www.reuters.com/business/
energy/what-is-spr-emergency-oil-stash-biden-may-tap-2021-11-18
was set up in the 1970s after the Arab Oil Embargo to ensure the United States
has adequate supply to weather an emergency.
If China is doing its release in coordination with other nations, it would be
the first such time, said Sengyick Tee, analyst at Beijing-based consultancy SIA
Energy.
China rolled out its first public auction of state crude oil reserves to a
select group of domestic refiners in September, aiming to stabilise energy
prices.
Biden and top aides have discussed the possibility of a coordinated release of
stockpiled oil with close allies including Japan, South Korea and India, as well
as with China, over the past several weeks, sources told Reuters earlier.
U.S. crude oil in Strategic Petroleum Reserves
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USCrudeSPRNov2021.png
OPEC and other major producers including Russia, known collectively as OPEC+,
have been gradually unwinding record production cuts made in 2020 by raising
output by 400,000 barrels per day per month.
But they have resisted Biden's calls for more rapid increases, arguing that the
rebound in crude demand could be fragile and there were already signs of a
surplus building in 2022.
The Biden administration had not addressed the "root cause" of high prices,
which was limited domestic U.S. supply, said Tilak Doshi, managing director at
Doshi Consulting in Singapore.
He cited the cancellation of the Keystone XL pipeline to bring oil from Canada's
Western tar sands to U.S. refiners, and bans on drilling on Federal lands.
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The Biden administration had been "doing everything to stymie domestic oil and
gas producers," Doshi said, adding that he believed Washington's call for a
coordinated response from allies plus China was a first.
(Reporting by Yang Heekyong in Seoul, Aaron Sheldrick and Yuka Obayashi in
Tokyo, Chen Aizhu in Singapore, Florence Tan in Singapore and Muyu Xu in
Beijing; Editing by Stephen Coates and David Clarke)
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