China is committing to US “oil drop” in the ocean.

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  • China says it will release oil reserves according to its needs
  • OPEC + will meet on December 2, but no signs of a change in tactics
  • Bid under political pressure as inflation picks up
  • Oil releases a “drop in the ocean” -Goldman Sachs
  • Crude oil prices are stable on Wednesday

BEIJING, Nov 25 (Reuters) – China, the world’s largest crude oil importer, was non-binding on whether to release oil from its reserves as requested by Washington, while OPEC sources said US action had not led the producer group to change course .

On Tuesday, US President Joe Biden’s administration announced plans to release millions of barrels of oil from strategic reserves in coordination with other major consuming nations, including China, India and Japan, to try to cool prices.

The United States has made the largest commitment for a release of reserves of 50 million barrels of pre-approved sales together with loans to the market, but without China the measure would have less effect.

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There was no further announcement from Beijing on Thursday after China said on Wednesday that it was working on its own reserve emissions, which a Reuters report confirmed last week that China would release oil according to its needs.

On Tuesday, Biden had told a briefing that China “can do more”.

Rumors of concerted action pushed down crude oil prices ahead of the US announcement, but the international market rose more than 3% on Tuesday as Washington confirmed it would use its strategic reserve and the market lacked clarity about China’s intentions.

The market is also keen to see OPEC’s next move as Washington’s announcement raised speculation that the Organization of the Petroleum Exporting Countries and Allies, commonly known as OPEC +, may react.

However, three sources told Reuters that the group was not considering pausing its current agreement to increase production by 400,000 barrels per day each month, a rate that is considered too slow by some consumer countries. Read more

Demand for fuel collapsed early in the pandemic but has resurfaced this year, and oil prices have climbed, driving wider inflation.

Biden, who is facing low approval ratings ahead of next year’s congressional election, was frustrated after OPEC + shrugged off his repeated requests to pump more oil. Retail prices of gasoline in the United States have risen by more than 60% in the past year, the fastest growth rate since 2000.

On Thursday, Brent oil fell 31 cents to $ 81.94 a barrel at 1000 GMT.

A ship from China Ocean Shipping Company (COSCO) is seen near oil tanks at China National Petroleum Corporation (CNPC) Dalian Petrochemical Corp in Dalian, Liaoning Province, China October 15, 2019. REUTERS / Stringer.

“The market seems to believe in OPEC + to keep oil balances tighter than it believes in the temporary nature of an SPR release,” Rystad Senior Oil Markets Analyst Louise Dickson said on Wednesday.

OPEC ANSWER

OPEC +, which includes Saudi Arabia and other US allies in the Gulf, as well as Russia, will meet again on December 2 to discuss politics.

The group is monitoring whether the oil markets are balanced, Iraqi Oil Minister Ihsan Abdul Jabbar said on Wednesday, saying the group must study the latest data before making a decision on delivery.

It is already the producer nations struggling to pump enough oil to meet existing targets and they are also concerned that a re-emergence of covid-19 cases could once again drive down demand.

Washington’s efforts to partner with major Asian economies to cut energy prices were a warning to OPEC + to control crude oil prices, which have risen more than 50% so far this year.

In the past, emissions from reserves have been coordinated in several countries by the International Energy Agency (IEA), a Paris-based watchdog. The IEA does not intervene to influence prices, but the head of the agency said on Wednesday that some producers have limited the supply too much.

“Some of the key strains in today’s markets can be considered artificial density … because in the oil markets today we see close to 6 million barrels per day in spare production capacity located with the key producers, OPEC + countries,” Fatih Birol, IEA chief, said. Read more

According to the plan, the United States will release 50 million barrels, corresponding to about 2-1 / 2 days of domestic demand. However, some analysts called the structure of the US release – a combination of 18 million barrels of pre-approved sales and a loan of 32 million barrels – too small and temporary.

Goldman Sachs said the volume announced was “a drop in the ocean”.

The effect of the sale from strategic reserves is expected to be felt first in the USA and then Asia. Read more

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Reporting by Yew Lun Tian in Beijing, Ahmad Ghaddar and Noah Browning in London, Olesya Astakhova in Moscow; Additional reporting by Timothy Gardner and Alexandra Alper in Washington, Arathy S Nair and Florence Tan in Singapore; Author by David Gaffen; Edited by David Gregorio and Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

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