Oil at six-week low as China readies crude oil reserve release

A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS / Anna Driver

TOKYO, Nov. 18 (Reuters) – Oil prices slid to a six-week low on Thursday as China announced it would release strategic reserves after a Reuters report reported the United States urged major consumer countries to coordinate releases Consider inventory levels to lower prices.

The US offer to shock markets and call for coordinated action from China for the first time comes as inflationary pressures, fueled in part by rising energy prices, create a political backlash as the world slowly recovers from worst health crisis in a century. Continue reading

Brent crude fell 83 cents, or 1%, to $ 79.87 a barrel by 0749 GMT after previously falling to $ 79.28, its lowest level since October 7.

US crude oil futures West Texas Intermediate fell $ 1.13, or 1.4%, to $ 77.23 a barrel after previously falling to $ 77.09, also their lowest level since early last month.

Coordinated oil reserve releases “coincide with this virtual meeting between Biden and Xi Jinping. The US wants to stop inflation and China probably wouldn’t mind seeing a damper on oil prices,” said John Driscoll, executive director of Singapore consulting firm JTD Energy .

US crude oil futures and forward prices have plummeted since November 1, when the US government urged some of the world’s largest crude oil buyers to consider coordinated crude sales

Prices hit a seven-year high in October as the market focused on the rapid recovery in demand that came with lockdowns to halt the spread of the coronavirus while the Organization of Petroleum Exporting Countries (OPEC) and its allies, OPEC +, continued to supply Big cuts slowly brought back last year.

US oil producers also hesitated to overpay on drilling after being penalized by investors for running into debt to pay for new exploration.

The International Energy Agency and OPEC announced in the last few weeks that more energy will be available in the next few months. OPEC + is sticking to an agreement to increase production by 400,000 bpd every month so as not to flood the market with offers.

“Releasing strategic stocks is likely to bring oil prices down only temporarily,” said Vivek Dhar, commodities analyst with the Commonwealth Bank of Australia. “There’s a good chance the markets have already priced in such an event.”

The United States and its allies previously coordinated the release of strategic oil reserves, for example in 2011 during a war in OPEC member Libya.

But the current proposal poses an unprecedented challenge to OPEC, the cartel that has influenced oil prices for more than five decades as it affects China, the world’s largest crude oil importer.

China’s state reserves agency said it was working on a release of crude oil reserves but declined to comment on the US request.

An official with Japan’s Department of Industry said the United States had asked Tokyo to cooperate in dealing with higher oil prices, but could not confirm whether the request included coordinated releases of stocks. According to the law, Japan cannot use reserve releases to lower prices, the official said.

A South Korean official confirmed that the United States had asked Seoul to release some oil reserves and considered the request, but added that it could only release crude in the event of a supply imbalance.

In its weekly inventory report, the United States Department of Energy said late Wednesday that crude oil inventories fell unexpectedly last week as refineries with profitable processing rates ramped up production ahead of the winter heating season.

Reporting by Aaron Sheldrick; Editing by Sam Holmes, Michael Perry and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

https://www.reuters.com/business/energy/oil-under-pressure-us-looks-lead-spr-shock-treatment-2021-11-18/