Oil Is Nearing A Six-Week Slump As China Prepares To Announce Its Oil Reserve Data
Crude oil prices fell to six-week low points on Thursday before regaining some footing as China announced it was preparing to tap reserves. The announcement followed a Reuters story that said the United States had asked global oil consumers to consider releasing stockpiles in order to bring prices down. China has been asked to participate in a concerted move for the first time in the United States’ attempt to chill markets, which comes as inflationary strains, partially caused by increasing oil costs, threaten to generate a political reaction.
Brent oil was off 20 cents, or 0.2%, to $80.08 a barrel at 1035 GMT, after falling to $79.28 previously in the day. This was the lowest level since Oct. 7 of this year. Crude oil futures in the United States fell 39 cents, or 0.5%, to $77.97 a barrel, after falling earlier to $77.08, which was the lowest price since earlier last month.
According to John Driscoll, managing director of Singapore-based consultancy JTD Energy, the planned oil reserve release corresponds with the virtual conference between President Joe Biden and Chinese President Xi Jinping. He also stated that the United States wishes to contain inflation and that China would likely welcome a reduction in the price of oil.
OPEC, Japan, And South Korea’s Role In Oil Prices And Reserves Policies
Prices soared to seven-year highs in October as the market concentrated on the rapid recovery in demand that has occurred since the easing of lockdowns to prevent the transmission of the coronavirus. The surge was aided in part by the policy of the Organization of the Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, to gradually increase output after a period of decline. The International Energy Agency and OPEC have both stated in recent weeks that additional supplies will be ready in the upcoming months.
However, because China is OPEC’s largest importer, the planned release of reserves offers an unprecedented threat to the organization. China’s state reserves agency said it was focusing on the release of crude oil reserves, but it refused to comment on the United States’ request for the release of such assets. According to a Japanese commerce ministry official, the United States has asked for Tokyo’s assistance in coping with rising oil costs.
Per the source, Japan is prohibited from using reserve releases to cut prices under Japanese legislation. A South Korean source said that the United States had requested that Seoul release part of its oil reserves and that Seoul was currently examining the request. However, the official noted that the country could only transfer petroleum in the event of a supply imbalance.