Governments from some of the world's biggest economies said they were looking into releasing oil from their strategic reserves, after a rare U.S. request for a coordinated move to cool global energy prices ahead of a meeting of major oil-producing nations.
The Biden administration has asked a wide range of countries, including China for the first time, to consider releasing stocks of crude, the White House said on Thursday.
Other major consumers India, Japan and South Korea were also involved in discussions, several people familiar with the requests told Reuters on Wednesday.
As the world economy rebounds from the pandemic, Washington and other nations have been frustrated that producers in OPEC+, the Organization of the Petroleum Exporting Countries and allies such as Russia, have rebuffed U.S. requests to speed up additional oil supplies.
OPEC nations, for their part, have said that world economies remain too fragile to warrant increasing supplies quickly.
To that end, the market slumped on Friday after Austria announced that it would reimpose a full nationwide lockdown due to soaring coronavirus cases, and Germany, Europe's largest economy, may soon follow suit.
International benchmark Brent was down 2.7% on Friday to $79.11 a barrel, the lowest since early October. The market has been weakening for several weeks as investors have started to anticipate an increase in supply worldwide.
With gasoline prices and other costs rising, Democratic U.S. President Joe Biden also faces political pressure ahead of midterm congressional elections next year. A Reuters poll in October showed 67% of U.S. adults agreed that inflation is a very big concern.
Members of Biden's national security team had discussed the need to meet fuel demand, White House spokesperson Jen Psaki said on Thursday. "That is an ongoing conversation and one we are having with a number of partners," she added.
OPEC+ plans to meet on Dec. 2. The group has been raising output by 400,000 barrels per day (bpd) per month, gradually unwinding record production cuts made in 2020 when the pandemic dissipated fuel demand.
This week, Secretary General Mohammad Barkindo said OPEC expects an oil supply surplus to begin building next month.
Other countries have been pressing OPEC for some time, including China and India.
"This is not a case of supplies not being available," Hardeep Singh Puri, India's oil minister, told a conference in Dubai on Wednesday. "There are 5 million barrels a day of supplies available which have not been released for whatever reason."
While OPEC+ has been raising oil output by 400,000 bpd per month since July, the producer group still has about 3.8 million bpd in supply cuts that it has not yet returned to the market. Several of the group's members have been unable to meet production targets due to years of under-investment.
"Half of (OPEC+'s) members can't meet their quotas given their own under-investment," Goldman Sachs analysts said in a Friday note.
OPEC+ in April 2020 cut output by more than 10 million barrels a day in response to the swift spread of the coronavirus pandemic.
A CHALLENGE TO OPEC
CHINESE, U.S. EFFORTS
China's state reserve bureau told Reuters it was working on a release of crude oil reserves, but declined to comment on the U.S. request.
It would also mark the first time that China, the world's No. 2 oil consumer and largest importer, would be involved in a coordinated release with the United States.
China held its first ever public auction of oil reserves in September.
Consultancy Energy Aspects said in a note to clients that Beijing is expected to release another 10 million to 15 million barrels of crude from its reserves in eastern Zhoushan in its next auction round.
"Any oil released from the Chinese SPR needs to be refilled within 90 days," Energy Aspects said.
"The market should focus on where these countries will find crude to refill these tanks given just how low stocks are."
The United States has the largest strategic reserve at more than 600 million barrels. The U.S. SPR was set up in the 1970s after the Arab Oil Embargo to ensure the nation had adequate supply to weather an emergency.
In the last several years, the shale boom has pushed U.S. output to rival that of Saudi Arabia and Russia. That has enabled the United States to become less dependent on energy imports from other nations, particularly members of OPEC.
The United States and its allies have coordinated strategic petroleum reserve releases before, such as in 2011 when supplies were hit by a war in OPEC member Libya.
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