China is committing to US ‘drop in the ocean’ oil spills

  • China says it will release oil reserves according to its needs
  • OPEC + meets on December 2, but no signs of change in tactics
  • Bite under political pressure as inflation picks up
  • Oil releases a ‘drop in the ocean’ – Goldman Sachs
  • Crude oil prices are stable on Wednesday

BEIJING, Nov. 25 (Reuters) – China, the world’s largest crude oil importer, was non-binding on whether to release oil from its reserves as requested by Washington, while OPEC sources said US action has not led the producer group to Change course.

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

The US has given the largest commitment to a release of reserves of 50 million barrels of pre-approved sales along with loans to the market, but without China the action would have less effect.

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There was no further announcement from Beijing on Thursday after China on Wednesday said it was working on its own release of reserves, confirming a Reuters report last week that China would release oil according to its needs.

On Tuesday, Biden had told a briefing that China “can do more”.

Rumors of coordinated action drove crude oil prices down ahead of the US announcement, but the international market rose more than 3% on Tuesday as Washington confirmed it would leverage its strategic reserve and the market lacked clarity on China’s intentions.

The market is also eager to see OPEC’s next move, as Washington’s announcement raised speculation that the Organization of the Petroleum Exporting Countries and Allies, collectively known as OPEC +, could respond.

However, three sources told Reuters that the group was not considering pausing its current agreement to increase production by 400,000 barrels a day each month, a rate considered slow by some consumer nations. Read more

Fuel demand collapsed early in the pandemic, but has risen again this year, and oil prices have risen, causing broader inflation.

Biden, who faces low approval ratings ahead of next year’s congressional election, was frustrated after OPEC + shrugged off his repeated requests to pump more oil. U.S. retail gasoline prices have risen more than 60% in the past year, the fastest increase since 2000.

On Thursday, Brent oil fell 31 cents to $ 81.94 per barrel. barrel at 1000 GMT.

A vessel from China Ocean Shipping Company (COSCO) is seen near oil tanks at China National Petroleum Corporation (CNPC)’s Dalian Petrochemical Corp. in Dalian, Liaoning Province, China October 15, 2019. REUTERS / Stringer.

“The market seems to believe in OPEC + to keep the oil balance tight more than it believes in the transient nature of an SPR release,” Rystad Senior Oil Markets Analyst Louise Dickson said on Wednesday.

OPEC ANSWER

OPEC +, which includes Saudi Arabia and other US allies in the Gulf as well as Russia, will meet again on December 2 to discuss policy.

The group is monitoring whether the oil markets are in balance, Iraqi Oil Minister Ihsan Abdul Jabbar said on Wednesday, saying the group should study the latest data before making supply decisions.

Manufacturing nations are already struggling to pump enough oil to meet existing targets, and they are also concerned that a resurgence of COVID-19 cases could once again drive demand down.

Washington’s efforts to unite with major Asian economies to lower energy prices were a warning to OPEC + to control crude oil prices, which have risen more than 50% so far this year.

In the past, emissions from several countries from reserves have been coordinated by the International Energy Agency (IEA), a Paris-based watchdog. The IEA is not intervening to influence prices, but the head of the agency said on Wednesday that some manufacturers have restricted supply too much.

“Some of the most important pressures in today’s markets can be considered artificial density … because in the oil markets today we see close to 6 million barrels a day in spare production capacity lies with the key producers, OPEC + countries,” Fatih Birol, IEA chief, said . Read more

According to the plan, the United States will release 50 million barrels, equivalent 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 with pre-approved sales and a loan of 32 million barrels – too small and temporary.

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

The effect of the sale from strategic reserves is expected to be felt first in the USA and then Asia. Read more

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Reporting by Yew Lun Tian in Beijing, Ahmad Ghaddar and Noah Browning in London, Olesya Astakhova in Moscow; Additional reporting by Timothy Gardner and Alexandra Alper in Washington, Arathy S Nair and Florence Tan in Singapore; Writing by David Gaffen; Edited by David Gregorio and Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

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