6 major countries start withdrawing from the strategic reserves… and oil prices are rising

Some of the world’s largest energy consumers have joined the US-led effort to release strategic oil reserves in a bid to cool high prices and tame inflation.

Despite this, oil prices jumped 3% yesterday, but returned to calm in morning trading on Wednesday, as Brent crude witnessed a slight decline, while US crude prices rose.

In a recent statement, the White House said that China, Japan, India, South Korea and the United Kingdom will join the initiative after weeks of discussions to formulate a plan to stop the price hike, bringing the number of countries that announced the withdrawal of reserves to 6 major countries.

The International Energy Agency, which monitors global oil supplies on behalf of the world’s leading economies, said it respects decisions made by individual countries on “how best to respond to the specific challenges and circumstances that each faces”. She added, “We are aware that high oil prices are placing a burden on consumers and increasing inflationary pressures during a period in which the economic recovery remains uneven and faces a range of risks.”

The United States is set to release about 50 million barrels of its Strategic Petroleum Reserve, with oil expected to reach the market in December.

India

India agreed to release 5 million barrels, to be timed in agreement with the other five countries. “India has repeatedly expressed its concern about artificially adjusting oil supplies below demand levels by oil-producing countries, leading to higher prices and attendant negative consequences,” the Indian government said in a statement. She said many Indian state governments had already taken “difficult steps” to reduce local taxes on fuel.

South Korea

The South Korean government announced that the size and timing of the release of its oil reserves would be decided in consultation with other countries, but said it was expected to be on a level “similar to previous cases of international cooperation”.

England

Also, the UK government said in a statement that it would allow companies to “voluntarily release” oil reserves of up to 1.5 million barrels, in what it described as a “reasonable and measured step to support global markets as we emerge from the pandemic.”

“As we’ve said before, we will work closely with our international partners to do what we can to support the global economy through the post-pandemic transition,” a government spokesperson said.

China

China confirmed Wednesday that it will use its reserve oil reserves, in cooperation with other countries, to reduce the prices of black gold.

“Given its current needs and conditions, China will use its natural reserves of crude oil and take other necessary measures aimed at maintaining market stability,” said Chinese Foreign Ministry spokesman Zhao Lijian.

CNN revealed last month that China does not publish much data on its oil reserves, but said in 2017 that it had established nine major reserve bases across the country, with a combined capacity of 37.7 million tons.

Japan

While Japanese Prime Minister Fumio Kishida said that his country “is studying what we can do based on our cooperation with allies” when asked about the possibility of liberating oil from its reserves in cooperation with the United States and other countries. Japan had 388 million barrels of total strategic crude oil reserves as of June 2020, according to the US Energy Information Administration. She said that 76% of them are government shares, and about 24% are commercial shares.

The Nikkei newspaper reported on Wednesday that Japan will auction about 4.2 million barrels of its national stockpile.

The newspaper said, without citing a source, that the crude oil auctions, worth about a day or two worth of demand in Japan, will be held by the end of the year.

oil prices

Today, Wednesday, Brent crude futures rose 13 cents, or 0.2%, to $ 82.44 a barrel, and West Texas Intermediate crude futures rose 20 cents, or 0.3%, to $ 78.70 a barrel.

And yesterday, the global benchmark Brent crude contracts ended the trading session up $2.61, or 3.3%, to record at a settlement of $82.31 a barrel.

US West Texas Intermediate crude contracts rose $1.75, or 2.3%, to settle at $78.50 a barrel.

This is the largest one-day increase in percentage terms for Brent crude since August and the highest closing level since November 16.

It also raised Brent’s premium to US crude to its highest level since mid-October.