China not yet committed to Washington oil release, OPEC+

China not yet committed to Washington oil release, OPEC+

China, the world’s largest crude oil importer, was not committed to its intention to release oil from its reserves as requested by the United States, while changing strategy in light of US action, according to three sources from the OPEC producer group. were not considering. ,

On Tuesday, US President Joe Biden’s administration announced plans to release millions of barrels of oil from strategic reserves in coordination with other big consuming countries, including China, Japan and India, to try to cool prices.

The United States has made the largest commitment to release reserves on loan as well as 50 million barrels of pre-approved sales to the market, but without China, the action is seen as less dramatic.

On Wednesday, China said it was working on issuing its own reserves. The announcement confirmed a Reuters report last week that China was working on its own timeline.

On Tuesday, Biden said at a briefing that China “could do more.” Crude oil prices were falling for several days on rumors of coordinated action, but

Oil prices rose 3% on Tuesday as Washington tapped its strategic reserves but markets lacked clarity on China’s intentions.

Washington’s move sparked speculation that the Organization of the Petroleum Exporting Countries and Allies, collectively known as OPEC+, might consider stalling its current agreement to boost production by 400,000 barrels per day, But the group is not looking into it, three sources told Reuters.

Fuel demand was down at the start of the pandemic, but is back this year, and oil prices have risen. Biden, who is facing low approval ratings ahead of next year’s congressional elections, has been frustrated by OPEC+’s refusal of his repeated requests to pump more oil. Retail US petrol prices have risen more than 60% in the past year, the fastest growth rate since 2000.

Brent crude fell 6 cents to $82.25 a barrel on Wednesday after gaining 3.3% on Tuesday. The contract had fallen 10% in the days before the news over rumors of a coordinated release.

“The market appears to believe in OPEC+ to keep the oil balance tighter than it believes in the transitory nature of the SPR release,” Lewis Dixon, senior oil market analyst at Rystad, said on Wednesday.

OPEC response

OPEC+, which includes Saudi Arabia and the Gulf as well as Russia’s other US allies, has so far turned down requests to pump in more. It meets again on 2 December to discuss the policy but has not yet indicated that it will change the policy.

The group is monitoring whether oil markets are balanced, Iraq’s Oil Minister Ehsan Abdul Jabbar said on Wednesday, adding that the group still needs to study the latest data before making decisions about supplies.

The group is struggling to meet current targets under its agreement to gradually increase production and is concerned that a resurgence of coronavirus cases could dent demand again.

Washington’s effort to slash energy prices in tandem with major Asian economies was a warning to OPEC+ to control crude prices that are up more than 50% so far this year.

In the past, multi-country releases from reserves have been coordinated by the International Energy Agency (IEA), a Paris-based watchdog. The IEA does not intervene to influence prices, but the agency’s head said Wednesday that some producers are restricting supply too much.

Fatih Birol of the IEA said, “Some of the key strains in today’s markets may be considered artificial reinforcements…

Under the plan, the United States would issue 50 million barrels, which equates to about 2-1/2 days of domestic demand.

However, some analysts called the structure of the US release — a combination of 18 million barrels of pre-approved sales and 32 million barrels of debt — too short and tentative.

Goldman Sachs said the amount announced was “a drop in the ocean”.

Officials said this is the first time the United States has coordinated such a move with some of the world’s biggest Asian oil consumers. India is planning to release five million barrels of oil from its national reserves and “a few million kilolitres” of oil to Japan. South Korea gave no details of its plans.

(Reporting by Yu Lun Tian in Beijing, Ahmed Ghadar and Noah Browning in London, Olesya Astakhova in Moscow)

(This story has not been edited by Business Standard employees and is automatically generated from a syndicated feed.)

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