Exclusive: US calls on Japan, China and others to consider tapping oil reserves – sources

An oil storage tank and pipeline equipment is seen during a Department of Energy visit to the Strategic Petroleum Reserve in Freeport, Texas, the United States, June 9, 2016. REUTERS / Richard Carson

WASHINGTON, Nov. 17 (Reuters) – The Biden administration has called on some of the world’s largest oil-consuming countries – including China, India and Japan – to consider releasing stocks of crude as part of the ‘a coordinated effort to bring down global energy prices, according to several people familiar with the matter.

The unusual demand comes as US President Joe Biden pushes back political pressure on rising pump prices and other consumer costs driven by a rebound in economic activity from lows reached at the start of the pandemic of coronavirus.

It also reflects the United States’ frustration with members of the Organization of the Petroleum Exporting Countries and its allies who have pushed back on repeated requests from Washington to speed up their production increases.

“We are talking about the symbolism of the world’s biggest consumers sending a message to OPEC that ‘you have to change your behavior’,” one of the sources said.

Oil prices eased on the news after further stabilizing below seven-year highs reached in early October.

Biden and his senior associates have discussed the possibility of a coordinated release of oil stocks with close allies including Japan, South Korea and India, as well as with China, in recent weeks, the sources said.

Tokyo responded positively to the initial outreach, according to one of the sources. It was not immediately clear how the others responded.

The US share of any potential release of reserves would have to exceed 20 to 30 million barrels to affect markets, according to a US source who participated in the discussions. Such a release could take the form of a sale or a loan from the US Strategic Petroleum Reserve – or both.

The SPR was created in the 1970s after the Arab oil embargo to ensure the United States had sufficient supplies to deal with an emergency.

Several people familiar with the matter have warned that negotiations on a coordinated release of the offer have not been finalized and that no final decision has been taken on whether to pursue specific action on oil prices. .

The White House declined to comment on the detailed content of conversations with other countries.

“No decision has been made,” a White House National Security Council spokesperson said.

For weeks, the White House said it was “talking with other energy consumers to ensure that global energy supplies and prices do not jeopardize the global economic recovery,” the spokesperson added. word.

After Reuters reported on discussions to the White House, U.S. crude futures were trading at $ 78.18, from $ 78.36 a barrel at the close, while Brent fell to $ 80.21 after closing at $ 80.28 a barrel.

Before the news broke, US crude and global benchmark Brent posted their lowest settlement prices since early October, with Brent down 1.7% and US crude down 3% for the day.

OPEC, led by Saudi Arabia and its Russian-led allies, has added about 400,000 barrels a day to the market on a monthly basis, but has resisted Biden’s calls for faster increases, arguing that the rebound in demand could be fragile.

OPEC Secretary General Mohammad Barkindo said on Tuesday he expected a global supply surplus to emerge as early as December.

“These are signals that we have to be very, very careful about,” he told reporters.

Rising oil prices upset Biden ahead of the 2022 midterm elections that will determine whether his Democratic Party maintains its low majorities in the U.S. Congress.

According to the AAA, gasoline prices in the United States are averaging $ 3.41 per gallon today, more than 60% higher than a year ago as the economy shrank. recovered after the COVID-19 pandemic.

Several Biden associates attribute the drop in his public approval ratings in recent months to worsening inflation from energy to food and other areas. The consumer price index is up 6.2% over the past 12 months, with its energy components up 30%.

The Paris-based International Energy Agency, an energy watchdog that includes some of the biggest oil consumers, including the United States, Japan and many European countries, has not made a statement. remark. In the past, the IEA has coordinated releases involving multiple countries.

“The IEA is closely monitoring the oil market and stands ready to act if necessary,” she said in a statement.

Reporting by Trevor Hunnicutt, Jarrett Renshaw and Tim Gardner; Additional reporting by Valerie Volcovici in Washington, Noah Browning in London and Nidhi Verma in New Delhi; written by Richard Valdmanis; Editing by David Gaffen, Heather Timmons and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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