By Chen Aizhu & Aaron Sheldrick

TOKYO (Reuters), Several of the largest buyers of crude oil worldwide said Thursday that they were considering tapping strategic reserves. This comes after several sources informed Reuters that the United States has requested a coordinated effort to reduce global energy prices.

Since Wednesday, oil prices have fallen by about 4%. This is because the shock treatment appeared to be in effect.

According to some people with knowledge of the matter, Joe Biden’s administration requested that big oil buyers, such as China and India, consider selling their crude oil stockpiles. [L1N2S82VT]

Biden faces midterm elections in 2012 and makes this surprising move to counter political pressures over pump prices rising and other consumer cost driven by an increase in economic activity following the lows experienced in the coronavirus pandemic.

John Driscoll is the managing director at JTD Energy, Singapore. “Brent has now fallen below 80 dollars,” he said. The short-term impact on oil markets is temporary, but it could be beneficial for at least an 8% correction.

(Graphics: U.S. & futures slip after U.S. govt requests that some big oil buyers sell reserves – https://fingfx.thomsonreuters.com/gfx/ce/mopanloklva/USvsBrentNov182021.png)

This U.S. action also reflects dissatisfaction with members of the Organization of the Petroleum Exporting Countries and its allies, who repeatedly rejected Washington’s repeated request to accelerate production.

Sources told Reuters that Biden has been in contact with top aides to discuss the possibility of a coordinated oil release with allies like South Korea, Japan and China over the last few weeks.

China’s state reserve bureau https://www.reuters.com/business/energy/exclusive-china-reserve-bureau-working-crude-oil-release-2021-11-18 said it was working on a release of crude oil reserves although it declined to comment on the U.S. request.

Officials from the Japanese Industry Ministry said that the United States requested Tokyo’s assistance in dealing with rising oil prices. However, he couldn’t confirm whether this request involved coordinated stockpile releases. According to the official, Japan can’t use reserves releases to lower oil prices.

According to a South Korean official, the United States asked Seoul for oil reserves.

We are reviewing U.S. requests thoroughly, but we don’t release any oil reserves due to rising oil prices. The official stated that we could potentially release oil reserves in the event of supply shortages, but would not respond to rising prices.

Before 2011, the United States and allies coordinated strategic petroleum reserve release coordination, such as in Libya during a conflict with OPEC.

However, this proposal is a unique challenge for OPEC. The cartel that has influenced crude oil prices for over 50 decades now faces unprecedented challenges because it includes China, which is the biggest global importer.

In the 1970s, after the Arab Oil Embargo ended, the U.S. SPR began to be established to make sure the United States had enough supplies in case of emergency.

(Graphics: oil in Strategic Petroleum Reserves – https://fingfx.thomsonreuters.com/gfx/ce/klpykdleepg/USCrudeSPRNov2021.png)

OPEC, Russia and other producers, collectively known as OPEC+ have been adding approximately 400,000 barrels to the market each month, but they have resisted Biden’s requests for faster increases. They argue that the rebound in the demand may be fragile.