Thursday, November 18, 2021
“Coordinated Action” with the USA?
China is now tapping its oil reserves
In order to cushion high and rising energy prices and to stimulate economic growth, China wants to tap into its oil reserves. US President Joe Biden is also working on a coordinated action. This approach is extremely rare. The oil price had reached a seven-year high in October.
In view of the high energy prices, China is preparing to tap its state oil reserves. “We are working on releasing crude oil reserves,” said a spokeswoman for the responsible authority for the Reuters news agency. At the same time, she announced that she would publish a statement on this later. The world’s largest oil importer last tapped state reserves in September and auctioned 7.38 million barrels to domestic refineries.
The People’s Republic keeps the level of its strategic reserves a secret. The last public update was in 2019, when the National Energy Administration announced that the country had oil reserves that should last for 80 days. Consulting firm Energy Aspects estimated earlier this year that China’s reserves hold about 220 million barrels of crude oil, which would equate to 15 days of demand.
According to information from the Reuters news agency, the US government has spoken to important other countries about tapping parts of their respective oil reserves. Such a coordinated move would aim to push oil prices down and stimulate economic growth, said several people familiar with the matter. Accordingly, these talks have been held in recent weeks with Japan, South Korea, India and China, among others. They are not locked. There is also no final decision as to whether such a step or others will affect oil prices.
“Coordinated Action”
“A coordinated action would certainly have a greater impact on the oil market than if only the USA would go this way alone,” explained Commerzbank analyst Daniel Briesemann. The last time there was such a stock was ten years ago, when the civil war in Libya led to a failure of the oil production there. “The US wants to get its inflation under control and China might not mind seeing lower oil prices,” said John Driscoll , Managing Director of the consulting firm JTD Energy.
Commodity analyst Vivek Dhar from the Commonwealth Bank of Australia assumes that the current price slide is only temporary. “Releasing strategic inventory will likely only bring oil prices down temporarily. There is a good chance the markets have already priced in such an event.” Oil prices rose to their highest level in seven years in October and are believed to be one of the reasons for the rise in inflation in many western countries.
The US Presidential Office did not want to comment on the content of the talks with other large energy-consuming countries, which have been repeatedly confirmed in the past. President Joe Biden had repeatedly called on the production cartel Opec and allied producers such as Russia to expand their oil production more quickly.
Meanwhile, the debate has put pressure on oil prices. A barrel of North Sea Brent fell at times on Thursday by more than one percent to $ 79.28. That was the lowest level in six weeks. US oil WTI fell 1.4 percent to $ 77.50 a barrel.