TOKYO, Nov 18 (Reuters): The world's biggest economies said on Thursday they were looking into releasing oil from their strategic reserves, following a rare request from the United States (US) for a coordinated move to cool global energy prices.
The US move reflects frustration with the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia who have rebuffed Washington's requests to speed up oil production as the world economy rebounds from the pandemic.
It also comes as US President Joe Biden fends off political pressure ahead of midterm elections next year over rising gasoline prices and other costs driven by the recovery.
The Biden administration has asked big oil buyers such as India and Japan - as well as China for the first time - to consider releasing stocks of crude, several people familiar with the requests told Reuters.
Oil prices sank about 4 per cent to a six-week low after Reuters reports about the US request and China's decision to release some crude, before recovering some ground later on Thursday.
"Brent is now under 80 bucks," said John Driscoll, managing director at consultancy JTD Energy in Singapore. "It's having a short-term effect on oil markets. It's probably good for at least a 5 per cent correction."
China's state reserve bureau told Reuters it was working on a release of its crude oil reserves, although it declined to comment on the US request.
A Japanese industry ministry official said Washington had requested Tokyo's cooperation in dealing with higher oil prices but he could not confirm whether the request included a coordinated releases of reserves. By law, Japan cannot release reserves to lower prices, the official said.
A South Korean official confirmed the United States had asked Seoul to release some oil reserves.
"We are thoroughly reviewing the US request, however, we do not release oil reserve because of rising oil prices. We could release oil reserve in case of supply imbalance, but not to respond to rising oil prices," the official said.
The United States and its allies have coordinated strategic petroleum reserve releases before, such as in 2011 when supplies were hit by a war in OPEC member Libya.
But because the current proposal involves China for the first time, it represents an unprecedented challenge to OPEC, the cartel that has influenced oil prices for over five decades.
The US SPR was set up in the 1970s after the Arab Oil Embargo to ensure the United States has adequate supply to weather an emergency.
If China is doing its release in coordination with other nations, it would be the first such time, said Sengyick Tee, analyst at Beijing-based consultancy SIA Energy.
Meanwhile, oil prices slid to six-week lows on Thursday before recovering some ground, as China said it was moving to tap reserves after a Reuters report that the United States was asking large consuming nations to consider a stockpile release to lower prices.
The bid by the US to cool markets, asking China to join a coordinated action for the first time, comes as inflationary pressures - partly driven by surging energy prices - start to produce a political backlash.
Brent crude was down 20 cents, or 0.2 per cent, to $80.08 a barrel by 1035 GMT, after earlier dropping to $79.28, the lowest since Oct. 7.
US West Texas Intermediate crude futures were down 39 cents, or 0.5 per cent, at $77.97 a barrel, having fallen earlier to $77.08, also the lowest since early last month.
Coordinated oil reserve releases "coincide with this virtual meeting between Biden and Xi Jinping", said John Driscoll, managing director at consultancy JTD Energy in Singapore.
"The US wants to arrest inflation and China probably wouldn't mind seeing a damper on oil prices."
US crude oil futures & forward prices slump since Nov 1 as US government asked some of the world's top crude buyers to consider coordinated crude oil sales.
Prices hit seven-year highs in October as the market focused on the swift rebound in demand that has come with the lifting of lockdowns to halt the spread of the coronavirus.
The rally was fuelled in part by the strategy of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, called OPEC+, to resume output only slowly.
The International Energy Agency and OPEC have said in recent weeks that more supply will be available in the coming months.
But the proposed release of reserves represents an unprecedented challenge to OPEC, because it involves top importer China.
China's state reserve bureau said it was working on a release of crude oil reserves although it declined to comment on the US request.
A Japanese industry ministry official said the United States had requested Tokyo's cooperation in dealing with higher oil prices. By law, Japan cannot use reserve releases to lower prices, the official said.
A South Korean official confirmed the United States had asked Seoul to release some oil reserves and it was reviewing the request but added that it could only release crude in case of a supply imbalance.
© 2026 - All Rights with The Financial Express
