Page 5 - NorthAmOil Week 46 2021

NorthAmOil COMMENTARY NorthAmOil

biggest oil consumers to open their SPRs, the Energy analyst Sengyick Tee told Reuters. The
amount of follow-through may be limited. analyst said the volume would be too small to
Both Japan and South Korea have indicated have an impact on stockpiles or refinery costs.
that they would be unable to release their crude The NFSRA announced on October 31 that it
reserves in order to influence international would release some oil product reserves in order
prices. to tackle supply shortages and stabilise prices.
An official with the Japanese Ministry of
Economy, Trade and Industry (METI) con- What next?
firmed to Reuters that the US had asked for The fact that the US has been working behind
Tokyo’s help in dealing with higher oil prices, the scenes to create a coalition of oil buyers able
but added that Japanese law prevented the coun- and willing to tackle OPEC+ should not be
try’s reserves from being used in such a way. surprising.
A South Korean official similarly confirmed In the hours following OPEC+’s decision
Washington’s request, before adding: “We are earlier this month, the Biden administration
thoroughly reviewing the US request; however, announced that it would consider using “the full
we do not release oil reserves because of rising range of tools” to protect the economy.
oil prices. We could release oil reserves in case “They have the capacity and the power now to
of supply imbalance, but not to respond to rising act and make sure this critical moment of global The US was
oil prices.” recovery is not impaired,” White House spokes-
While China’s National Food and Strategic woman Karine Jean-Pierre said on November frustrated after
Reserves Administration (NFSRA) has con- 4. She added the US operates in “a competitive OPEC+ agreed
firmed that the government is planning to tap free market system” and stressed that OPEC+
its SPR for the second time this year, one analyst had affected global oil prices that, in turn, affect at the start of
has warned that the volume will likely be too domestic gasoline prices.
small to have much of an impact. What would be surprising is if Washington the month to
“We are carrying out the work of releasing is able to get much traction, given its strained
crude oil reserves. And for any details related relations with China and the apparent apathy stay the course
to the releasing, we will put out a statement on shown by Japan and South Korea. India, which with its current
our website,” Reuters quoted an NFSRA spokes- has long called for a coalition of consumer
woman as saying on November 17. She declined countries, does not have a large enough SPR to production plan.
to comment on whether the release was in make a meaningful contribution to the debate.
response to Washington’s request. For its part, OPEC+ will be unwilling to suc-
The government invited some domestic refin- cumb to pressure on this front given its warning
ers to participate in a crude reserve auction in that there is a real risk of a market oversupply
September, selling around 7.38mn barrels of in the coming months. OPEC Secretary-Gen-
reserves. eral Mohammad Barkindo told reporters on
“China has its own plan for the [SPR] releases. November 16 that a surplus could emerge as
[We expect] the second release volume should soon as December. He said: “These are signals
be similar to the first one,” Beijing-based SIA that we have to be very, very careful.”™

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