Japanese and Indian officials are working on ways to release national crude oil reserves in tandem with the United States and other major economies, but the timing of such a release remains unclear, seven government sources with knowledge of the plans told the news agency. Reuters said.
Such an announcement could come as early as Tuesday, according to a source familiar with the discussions, but White House and U.S. Department of Energy officials said no official decision has been made on a release.
US President Joe Biden has called on China, India, South Korea and Japan for a coordinated release of oil supplies as US gasoline prices rise and its approval ratings fall ahead of next year’s congressional elections.
The US government has been unable to persuade OPEC + – OPEC and other producers including Russia, collectively known as OPEC + – to pump more oil, with large producers arguing that the world has little crude oil.
OPEC + added about 400,000 barrels a day to the market each month, but resisted Biden’s calls for faster increases, arguing that the recovery in demand could be fragile.
The threat of a coordinated release, coupled with new coronavirus-related restrictions in Europe, has blown the wind out of crude oil rally. Brent crude oil last traded at $ 79.30 a barrel, more than $ 7 lower from a high reached in late October.
Citigroup analysts have estimated in a note that the US could release anywhere from 45 million to 60 million barrels from its reserves that would advance some 20 million barrels in already approved sales. The bank said a combined release could be “in the order of 100-120 million” barrels or more.
However, one source familiar with the discussions said the input from China and other countries is still much in the air, and that nations such as India and South Korea are likely to contribute a small number of barrels.
Such a move could force OPEC + to reconsider whether it will continue its current rate of steady rise, said Joseph McMonigle, secretary general of the Riyadh-based International Energy Forum (IEF).
“If they are going to make a change, it will be due to unforeseen external factors, such as these restrictions in Europe, any kind of strategic release and shifts in the demand for jet fuel,” McMonigle said. The IEF is the largest international organization of energy ministers and includes Saudi Arabia, the United States and Russia.
The increase in COVID cases in Europe supports recent remarks by people like Mohammed Barkindo, Secretary-General of OPEC, who said that the market will soon face a surplus. In that case, OPEC members with more space to promote output may prefer to maintain or even reduce current production.
“A SPR (Strategic Petroleum Reserve) release could easily backfire,” says Troy Vincent, market analyst at analysis and technology company DTN.
Japanese Prime Minister Fumio Kishida has indicated he is ready to release shares over the weekend.
Three Indian government sources said on Monday they were holding consultations with the US on the release of oil from strategic reserves.
Japan, the world’s fourth largest oil buyer, is limited in how it can act with its reserves – which consist of both private and public shares – that can typically only be used in times of shortage.
One Japanese source said the government was looking at releasing crude oil from the portion of state-owned shares beyond the minimum amount required as a legal solution.
Japan’s oil reserve at the end of September kept 145 days of daily petroleum consumption, according to official data, well above the minimum 90 days required by law.
Japanese private companies, including refineries, hold about 175 million barrels of crude and oil products as part of the Strategic Petroleum Reserve (SPR), enough for about 90 days of consumption, according to state agency Jogmec.
India holds about 26.5 million barrels of oil in its reserve.