Stock Groups

Biden’s overture to Asian oil consumers serves warning to OPEC+ -Breaking

[ad_1]

2/2
© Reuters. FILEPHOTO: Aerial photograph of crude oil storage tanks at Cushing’s oil hub, Cushing, Oklahoma. U.S. April 21, 2020. REUTERS/Drone Base

2/2

By Timothy Gardner

WASHINGTON (Reuters] – Biden’s demand for a coordinated withdrawal of oil stocks serves as a reminder to OPEC+ producers that they should increase oil production to counter high fuel costs in powerful economies such the United States, China, and the rest of the world.

The White House and Administration officials have been urging the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to increase production to meet demand in the wake of the pandemic.

After these pleas were rejected, the Biden administration came up with a plan to press OPEC+ in advance of the Dec. 2 meeting about oil output policy.

According to Reuters, an administration source revealed that Hochstein led the gathering of long-time friends Japan and South Korea along with China and India for a discussion about releasing emergency reserves jointly.

These countries are together the five biggest oil importers in the world, and this move could be seen as an important signal of consumer-nation cooperation on global energy prices. Stocks being released could lead to lower prices, at most in the short term, according analysts. This could have a negative impact on OPEC+ revenue.

Kevin Book from ClearView Energy Partners analyst group stated that “the strategy seems not only to be a response the alleged rejection of the presidential requests but also as a deliberate threat.”

Just as Saudi Arabia and other OPEC nations years ago joined with Russia and other producers to form the more powerful OPEC+, Biden’s outreach to Asian nations suggests the possibility of a broader consumer group that could become “the IEA+”, Book said.

OPEC+ said that they will stick with plans to gradually increase output to around 400,000 barrels per month. One OPEC+ source claimed that the U.S.’s move was a desperate attempt to undermine the group. He said, “cases COVID are growing and certain new containment measures would be imposed which will decrease the oil demand.”

CONSUMER UNITY

The United States has always worked in partnership with the Paris-based International Energy Administration (a group of 30 energy-consuming industrialized nations) when global supply problems require a coordinated release stock.

Japan, South Korea and India are IEA member countries. China and India remain associate members. A spokeswoman for China said that the reserve bureau in China is currently working to release reserves. She did not provide further details.

India was the biggest oil consumer and has reduced shipments to Saudi Arabia nearly 25% after OPEC+ increased production.

Hardeep Singh Puri (Oil Minister) said this week in Dubai that OPEC member countries could benefit from high oil prices for a time, but if they fail to support the global recovery, “That may rebound and come back to you.”

Biden’s source claimed that the U.S. turned to Asian countries over European IEA members, who were more worried about soaring price and less about Asian prices.

“We understand that’s not where they would probably want to intervene in the market,” the source said.

Biden’s relationship with Saudi Arabia has been volatile. Biden described Saudi Arabia as a “pariah” on the 2019 campaign trail and promised to stand firmer against Saudi’s human-rights record and war in Yemen.

Biden’s administration restricted arms sales to Saudi Arabia to defensive weapons. U.S. lawmakers criticize Riyadh over its role in Yemen. The conflict has been deemed one of the most devastating humanitarian catastrophes.

However, the White House hasn’t threatened to end military support like former President Donald Trump in 2020, when Saudi Arabia flooded the marketplace with millions more barrels of crude oil. Although it resulted in gasoline being cheaper, crude oil prices dropped to negative $40. This also threatened the jobs of U.S. workers in the domestic oil industry.

Biden suggested that the Saudis would not increase crude oil supplies and that he could discuss the issue of a simultaneous release of emergency reserves with President Xi Jinping of China. This was part of a larger discussion which took place earlier in the week.

According to an administration source, “While there are some disagreements with China on certain issues, it is clear that we can cooperate with them in this area because we share many similarities regarding the effect of high oil prices on both our economies.”

[ad_2]