Tribune News Service
New Delhi, November 24
The dip in international crude prices soon after US President Joe Biden’s announcement to release oil from American strategic reserves in concert with other countries, including India, China and Japan, proved short-lived.
Crude prices began inching up soon after it became clear that China was ambiguous and the expected releases from South Korea, Japan, UK and South Korea will not be high.
The market expects the cumulative release of 80 million barrels to be the benchmark for sending a strong signal to OPEC+ countries. So far, substantial amounts announced are 50 million barrels by the US and 5 million barrels by India.
South Korea has not announced the volume but if the last experience during the Libyan crisis in 2011 is a guide, it could release about 3.5 million barrels. Japan’s law on strategic reserves does not allow withdrawals to lower oil prices. Hence, it may release just over 4 million barrels by other means. The UK may contribute 1.5 million barrels if privately held reserves heed the call of 10 Downing Street.
Hopes, therefore, rest on China. Experts say it needs to release 15 million tones but the signals were ambiguous. The Chinese MEA said Beijing is maintaining “close communication with relevant parties, including oil consuming and producing countries” and had “noted” recent actions by some countries on strategic reserves.
In the long term, Biden’s plan will depend on two alternative sources. One is Nigeria, whose US market disappeared after it became self-sufficient. With sourcing Nigerian crude in mind, US Secretary of State Antony Blinken earlier this month visited Nigeria as well as Senegal, which is expanding its natural gas supply.
The other country which can pump more oil is Iran. The US, along with other countries, will open talks on re-implementing an agreement that allows Iran to bring substantial supplies to the world market. As it is, reports have stated that the US has taken a lenient view of private Chinese companies sourcing oil from Iran.