Nov 23, 2021: According to a report by Bloomberg, OPEC+ officials warned that they would likely respond to plans by the world’s largest oil consumers to release oil from their strategic reserves, sparking a battle for control of the global energy market.
According to a briefing on the issue, President Joe Biden, along with China, India, Japan and South Korea, will announce plans on Tuesday to release reserves from the Strategic Petroleum Reserve. The move, designed for weeks, is designed to reduce the rise in fuel prices for drivers and businesses this year.
The move would represent the largest discharge of stockpiled crude from major economies made outside the auspices of the International Energy Agency. Previous global efforts to tap stockpiles, such as the 2011 release of 60 million barrels in the wake of unrest and supply disruptions in Libya, were coordinated by the IEA, of which China isn’t a member.
Japanese Prime Minister Fumio Kishida said on Saturday his government was considering a release from reserves in coordination with countries such as the U.S. Indian officials said Monday that they were studying a similar move. Indian officials said on Tuesday they were likely to take part.
OPEC + delegates say the release of millions of barrels from their largest consumer inventories is unwarranted given current market conditions and the group will have to reconsider plans to increase oil production when it meets next week.
The conflict threatens to be one of the biggest obstacles to oil geopolitics since the price war between Saudi Arabia and Russia in early 2020. The price of the world’s most important commodity is at stake as politicians and central bankers face a sharp rise in inflation. It also reflects the strained relations between Washington and Riyadh, which have traditionally been the cornerstone of US relations in the Middle East.
The situation continues and plans may change, but the United States is considering releasing more than 35 million barrels over time. The pending announcement was made by those who requested anonymity before the official statement.
Despite the imminent stockpile release prices rallied almost 1% in New York to $76.63 a barrel as traders weighed the prospect on OPEC+ response.
The 23-nation coalition has already rejected calls from US President Joe Biden and others earlier this month to speed up the return of supplies cut off during pandemic. The delegates, speaking on condition of anonymity, said that even the slight increase in production they had recorded could now be reviewed when the group meets next week.
For Biden, the coordinated release would mark a diplomatic win for the U.S., especially given the involvement of China. The matter was discussed with President Xi Jinping in a virtual summit last week.
His battle to bring down prices stands in contrast to his predecessor Donald Trump’s effort to persuade Saudi Arabia and Russia to end a price war in early 2020 that crashed prices during the start of the coronavirus pandemic.
It also shows that in an inflationary environment, where prices of everything from cars to meat are rising, large economies have a lower pain threshold for oil prices. During the Obama administration oil spent years above $100 a barrel without it becoming a political flash point.
Biden’s decision to bolster support from China, India and Japan, which is bringing together the world’s four largest consumers, will fall sharply on Saudi Arabia, traditionally a close ally of the United States in the Middle East.
Since taking office earlier this year, Biden has refused to deal directly with the country’s de facto ruler, Muhammad bin Salman, whom he accuses of killing journalist and activist Jamal Khashoggi.
The Organization of the Petroleum Exporting Countries and its allies will meet in December to consider a 400,000-barrel-a-day increase in production in January.
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