Page 6 - LatAmOil Week 47 2021

LatAmOil COMMENTARY LatAmOil

US confirms co-ordinated

release of oil from reserves

The US has teamed up with China, India, South Korea, Japan and the

UK to co-ordinate releases from their strategic petroleum reserves

THE US announced this week that it would barrels from privately held reserves. The Japa-
release 50mn barrels of crude from its strate- nese government said on November 24 that it
WHAT: gic petroleum reserve (SPR). The move will be would release several million barrels, though it
The US, China, India, co-ordinated with China, India, South Korea, did not specify volumes, and South Korea also
South Korea, Japan and Japan and the UK in a bid to provide relief from said it would participate in the joint release with-
the UK have agreed to oil prices that recently hit a seven-year high. out providing specific numbers.
jointly release crude from The initiative comes after the OPEC+ group The Rystad Energy consultancy has esti-
their SPRs. has ignored repeated calls to lower crude prices mated that a combined 71.5mn barrels could be
by releasing more oil into the market. The group released by all the countries jointly. Meanwhile,
WHY: recently opted to maintain its current output investment bank Goldman Sachs estimated
The move comes as an plan, which entails scaling up production by crude reserve releases from South Korea, Japan,
attempt to rein in high
oil prices after OPEC+ only 400,000 barrels per day (bpd) each month China, India and the UK totalling up to 30mn
ignored repeated calls to until the end of 2022. Thus far, OPEC+ has barrels, which would bring the total, including
help lower prices. shown no signs of altering its plan, but this could US volumes, to up to 80mn barrels.
now change in the wake of the joint SPR release. This is the first time the US has co-ordinated
WHAT NEXT: Now, though, the US has said that up to 32mn such a move with some of the world’s largest
The SPR release may barrels would be released from its SPR over the consumers of crude. (See NorthAmOil Week
have less of an impact coming months through an exchange, while the 46) It puts pressure on OPEC+ to deviate from
than the countries timeline for a previously approved outright sale its chosen strategy and threatens to upset oil
involved are hoping for. of 18mn barrels would be accelerated. geopolitics.
“We will continue talking to international
partners on this issue. The president stands Impact questions
ready to take additional action if needed, and is However, the impact of the co-ordinated release
prepared to use his full authorities working in on the oil market has been questioned, and
co-ordination with the rest of the world,” a sen- Argus Media suggested that markets had been
ior official in the administration of US President anticipating a larger release.
Joe Biden stated. Rystad, meanwhile, said that if the plans
Deliveries of SPR crude will take place translated into an average supply addition of
over January-April 2022, with early deliveries 1.2mn bpd over a two-month period starting in
accepted in late December 2021. Under the mid-December, that would be “not immaterial”
exchange arrangement, oil companies taking in a market of 80mn bpd. However, it added that
crude released from the SPR must return it, with the US swapping 32mn barrels rather than
which has been scheduled for 2022-24. Such selling them outright, much of the extra sup-
swaps are typically offered when oil companies ply released onto the market would be tempo-
face supply disruptions, such as pipeline outages rary, simply “shifting the timing of the market
or damage from extreme weather, while outright dynamics further down the road”.
sales of SPR crude are less common. The consultancy added that it had already
anticipated the market tipping into surplus in
Joint release February 2022, and that the US-led release could
Biden has been seeking to agree on a joint release bring this forward to December. “The release
for weeks, and his efforts have borne fruit, to may be a case of too much, too late, as the oil
some extent. However, the US accounts for the market was tightest and needed supply relief in
largest volumes set to be released by far, while September,” Rystad’s senior oil markets analyst,
the contributions of other countries look set to Louise Dickson, wrote in a market comment.
be small in comparison. In addition, the Wall Street Journal reported
China said last week that a second release on November 24 that certain members of
from its SPR was in the works. India has said OPEC+, including Russia and Saudi Arabia,
it would release 5mn barrels, and the UK said are considering pausing their gradual supply
it would allow the voluntary release of 1.5mn scale-up.

P6 www. NEWSBASE .com Week 47 25•November•2021