Biden prepares to use strategic reserves, OPEC+ warns against OPEC news

The development of reserves will help alleviate soaring fuel prices, and some countries are considering this move.

OPEC+ officials warned that they may respond to plans by the world’s largest oil consumer to release oil from strategic stockpiles, thus fighting for control of the global energy market.

According to officials familiar with the matter, President Biden will announce a plan on Tuesday to work with China, India, Japan and South Korea to release reserves from the strategic oil reserves. This plan has been in place for several weeks to ease the increase in fuel prices for drivers and businesses this year.

The OPEC+ representative said that from the current market conditions, it is unreasonable to release millions of barrels of oil from its largest customer’s inventory, and the organization may have to reconsider its plan to increase oil production when it meets next week.

Since the price war between Saudi Arabia and Russia in early 2020, this battle threatens the greatest turmoil in oil geopolitics. The prices of the world’s most important commodities are in danger as politicians and central bank governors are dealing with the strongest inflation spike in more than a year. ten years. It also shows the tension between Washington and Riyadh, which is the traditional cornerstone of US relations in the Middle East.

The situation is still changing and plans may change, but the United States is considering releasing more than 35 million barrels of oil over time. The person who requested anonymity before the official statement described the pending announcement.

Helima Croft, chief commodity strategist at RBC Capital Markets LLC, said: “This move may increase the stakes in the oil poker game and may put new pressure on the bilateral relationship between Washington and Riyadh.”

Although the inventory is about to be released, the price in New York rose nearly 1% to US$76.63 per barrel as traders weighed the prospect of OPEC+ response.

Earlier this month, the 23-nation coalition has rejected calls from US President Joe Biden and others to expedite the restoration of supplies that were stopped during the pandemic. While discussing the private review, the representatives, who asked not to be named, said that even their planned modest increase in production may now be reassessed at the group meeting next week.

Joseph McMonigle, Secretary-General of the International Energy Forum, based in Riyadh, said in a statement on Monday: “I expect the OPEC+ Energy Minister to maintain the current plan to gradually add more supplies to the market.” “However, , Certain unforeseen external factors, such as the release of European strategic reserves or new blockade measures, may prompt the market to reassess market conditions,” McMonig said after meeting with officials from the Japanese Ministry of Foreign Affairs.

For Biden, the coordinated release will mark a diplomatic victory for the United States, especially considering China’s participation. This was discussed with President Xi Jinping at the virtual summit last week.

His price-cutting war is in stark contrast to his predecessor Donald Trump’s efforts to persuade Saudi Arabia and Russia to end the price war in early 2020, which caused prices to plummet at the beginning of the coronavirus pandemic.

It also shows that in an inflationary environment, the prices of everything from cars to meat are rising, and that large economies have a low pain threshold for oil prices. During the Obama administration, the price of oil has been more than $100 per barrel, but it has not become a political hot spot.

This move will be the largest one-time inventory of crude oil emissions from major economies outside of the International Energy Agency’s sponsorship. Previous global efforts to use stocks — such as the release of 60 million barrels of oil after the turmoil and supply disruption in Libya in 2011 — were coordinated by the International Energy Agency, which China is not a member of.

Japanese Prime Minister Fumio Kishida said on Saturday that his government is considering coordinating the release of reserves with the United States and other countries. Indian officials said on Monday that they are studying similar measures. Indian officials said on Tuesday that they might participate.

Biden decided to solicit the support of China, India and Japan to bring the world’s top four consumers together. This will be severely affected in Saudi Arabia, which is traditionally the closest ally of the United States in the Middle East.

Since taking office earlier this year, Biden has refused to deal directly with the kingdom’s de facto ruler Muhammad bin Salman, who accused him of murdering journalist and activist Jamal Khashoggi.

The Organization of Petroleum Exporting Countries and its allies will hold a meeting on December 2 to consider increasing January’s daily output by 400,000 barrels.

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