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Asian Oil Consumers Yet to Follow Through on Strategic Releases -Breaking

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© Reuters. Asian Oil Consumers are yet to follow through on strategic releases

(Bloomberg) — It’s been almost three weeks since the U.S. unveiled an internationally coordinated release of oil from national reserves, but so far there’s been little follow through from the other five nations.

President Joe Biden said on Nov. 23 that the U.S. would release 50 million barrels of crude from its Strategic Petroleum Reserve in “the next several months.” The unprecedented move would be done in parallel with China, Japan, South Korea, India and the U.K., he said.

The United States has already granted the first SPR oil release to its citizens. Exxon Mobil Corp (NYSE:)., and intends to issue another sale notice for 18 million barrels this week, there’s been radio silence from the other participants. That’s starting to prompt some skepticism in the market about whether they’ll go ahead at all, particularly after the omicron virus variant led to a sharp drop in global prices.

The Asian nations’ participation in what looks like a buyers’ cartel puts them in a tough spot, said John Driscoll, chief strategist at JTD Energy Services Pte.

“They can’t afford to jeopardize their relationships with major producers to satisfy a U.S. president who’ll be up for re-election in a few years,” he said. They may also “be reluctant to tap into their reserves ahead of peak winter demand, when supply disruptions can lead to major issues,” Driscoll said.

This joint release, which was unheard of, was not subject to a supply shock. It came after weeks of intense lobbying by Biden following OPEC+’s rejection of calls for increased supply. Although it contributed to lower prices prior to the announcement many market participants were not impressed by the volume of data that other countries than the U.S. promised to release.

India, the Asian country that had made a commitment to release 5,000,000 barrels of crude oil, was the sole one who was able to definitively state its volume. However, questions still remain about timing. Indian Strategic Petroleum Reserves Ltd.’s head stated Dec. 3 that he is still waiting to hear from the federal governments on when and how to get the crude. 

Japan did not provide details about volumes and timing. However, the paper reported that Japan would be releasing around 4.2million barrels. South Korea stated on November 23rd that details like volume and timing would be decided after discussions with partners countries, but it indicated it would release about 3.5million barrels.

Also see: Biden wants major oil reserve sales. That’s Not Easy in Asia 

China is being somewhat vague, and Beijing doesn’t seem to want the U.S. to follow it. In November, it said that oil was being sold from its own reserves. This came just days after a summit between President Xi Jinping and Biden. According to a Western source familiar with the situation, the Chinese may sell 7 million to 15,000,000 barrels. Since then, there have not been any official announcements.

A spokesperson for the U.K. government said companies may choose to be part of the joint release. According to the spokesperson, if everyone contributes, there would be 1.5 million barrels sold.

The White House referred to a Nov. 29 briefing at which Press Secretary Jen Psaki said the U.S. was encouraging any country, including China, to be “as transparent as possible in any of their policy maneuvers,” when asked about other nations releasing reserves.

The abrupt omicron-driven decline in crude prices towards the end November could have decreased the need for immediate action. However, over half the plunge in crude prices has been recovered. There are signs that this new variant is not as dangerous as first thought. Non-U.S. states may feel more motivated to sell reserves if the prices rise. 

©2021 Bloomberg L.P.

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