OPEC+ warns of response as Biden readies to tap strategic reserve
Category: News & Politics
Via: hallux • 3 years ago • 14 commentsBy: Grant Smith and Salma El Wardany and Jennifer A. Dlouhy - Bloomberg
OPEC+ officials warned they’re likely to respond to plans by the world’s largest oil consumers to release oil from their strategic stockpiles, setting up a fight for control of the global energy market.
President Joe Biden is set to announce a plan to release reserves from the Strategic Petroleum Reserve on Tuesday in tandem with China, India, Japan and South Korea, according to officials briefed on the matter. The move, weeks in the planning, is designed to ease this year rise in fuel prices for drivers and businesses.
OPEC+ delegates said the release of millions of barrels from the inventories of their biggest customers is unjustified by current market conditions and the group may have to reconsider plans to add more oil production when they meet next week.
The tussle threatens the biggest ructions in the geopolitics of oil since the price war between Saudi Arabia and Russia in early 2020. At stake is the price of the world’s most important commodity as politicians and central bankers contend with the strongest inflationary surge in more than a decade. It also shows the strained relationship between Washington and Riyadh, traditionally a cornerstone of U.S. relations in the Middle East.
The situation remains in flux and the plans could change but the U.S. is considering a release of more than 35 million barrels over time. The pending announcement was described by people who requested anonymity prior to official statements.
“Such a move would potentially raise the stakes in the oil poker game and could produce new strains in the bilateral relationship between Washington and Riyadh,” said Helima Croft, chief commodities strategist at RBC Capital Markets LLC.
Despite the imminent stockpile release prices rallied almost 1% in New York to $76.63 a barrel as traders weighed the prospect on OPEC+ response.
The 23-nation alliance already rebuffed calls from U.S. President Joe Biden and others earlier this month to speed up the return of supplies halted during the pandemic. Delegates, declining to be named discussing private deliberations, said that even the modest production increase they have penciled in may now be re-evaluated when the group meets next week.
“I anticipate OPEC+ energy ministers will maintain their current plan of adding more supplies to the market gradually,” Joseph McMonigle, Secretary-General of the Riyadh-based International Energy Forum, said in a statement Monday. “However, certain unforeseen external factors such as a release of strategic reserves or new lock-downs in Europe may prompt a reassessment of market conditions,” McMonigle said after a meeting with a Japanese foreign ministry official.
For Biden, the coordinated release would mark a diplomatic win for the U.S., especially given the involvement of China. The matter was discussed with President Xi Jinping in a virtual summit last week.
His battle to bring down prices stands in contrast to his predecessor Donald Trump’s effort to persuade Saudi Arabia and Russia to end a price war in early 2020 that crashed prices during the start of the coronavirus pandemic.
It also shows that in an inflationary environment, where prices of everything from cars to meat are rising, large economies have a lower pain threshold for oil prices. During the Obama administration oil spent years above $100 a barrel without it becoming a political flash point.
The move would represent the largest discharge of stockpiled crude from major economies made outside the auspices of the International Energy Agency. Previous global efforts to tap stockpiles — such as the 2011 release of 60 million barrels in the wake of unrest and supply disruptions in Libya — were coordinated by the IEA, of which China isn’t a member.
Japanese Prime Minister Fumio Kishida said on Saturday his government was considering a release from reserves in coordination with countries such as the U.S. Indian officials said Monday that they were studying a similar move. Indian officials said on Tuesday they were likely to take part.
Biden’s decision to marshal support from China, India, and Japan, pulling together the world’s top four consumers, will go down badly in Saudi Arabia, traditionally one of America’s closest allies in the Middle East.
Since taking office earlier this year, Biden has refused to deal directly with the kingdom’s de facto ruler, Mohammed bin Salman, who he blames for the murder of journalist and activist Jamal Khashoggi.
The Organization of Petroleum Exporting Countries and its allies will meet on Dec. 2 to contemplate an increase of production by 400,000 barrels a day in January.
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And another Black Gold skirmish slithers into the fray.
SA is one of our strongest allies in the ME...LOL, sure they are.
They're a Welfare State funded by Oil.
The US should increase production instead of dipping into the reserves
Exactly! This is a fake crisis entirely of Joe Bidens own making. Use of the reserve should be exclusive to a real emergency.
You should take your uninformed opinion and tell it to China, Japan, and India who will be doing the same.
Or you could tell the US producers to increase production, or talk to OPEC and tell them to increase their output to meet demand.
Tell Biden to get out of the way first and we would happily tell US oil producers to increase production. You can start by telling him to rescind his EO on the amount of methane that can be produced while drilling for oil. Second tell him that rail is not the safest way to transport any type of oil; no matter how rich it is making George Soros. Lastly drop his absurd drilling and exploration ban on federal lands- which the courts already did; but good old Joe doesn't listen to the courts.
Just ask the oil companies- they would happily produce more if there was profit in it; and they weren't afraid Biden was going to pull the rug out from under them.
They already vehemently told Biden no. Wonder what he did to piss them off? It is not our job to tell OPEC what to do. Biden is supposed to be leader of the free world; but every action he has taken has stifled oil production in the US. Why should the rest of the world pickup the slack for the US? If the US increases oil production so will they.
I've posted this for you before, if you didn't read it that's on you but stop with the BS replies about it.
Exploration and production is doing well on tribal lands.
Oil has always moved by rail and will likely continue well into the future. The BS about Keystone is just that, it didn't move any oil, and the expansion of existing pipelines more than makeup for the amount that would have moved through a completed Keystone.
Opec wants to keep the price of oil high for obvious reasons. They have not reached their pre-pandemic level of production. The four largest consumers of oil have all stated they will open their reserves or already have. Now OPEC is concerned with the US and others opening their reserves and with a possible slowdown in the world economy (pandemic in Europe)
Take a look at this link and it shows that the number of producing wells in the US as of Nov 21, 2021, vs pre-pandemic and you'll see that we are still far below what they were operating in early 2020.
I've produced links for all my other comments and it seems that you didn't read them so I won't waste my time producing them again.
Must be news to the people running Keystone that it didn't move any oil.
Yes, the rail has been moving tar sands for a very long time- on antiquated tanker cars; check how many derailments of these trains there have been. This is not something that can just be buried and forgotten. Clean up takes specialists and weeks of track closure. I speak from experience of having material on trains that have been stuck behind these derailments. Anyone claiming that rail is a safer means to move this material doesn't know what the hell they are talking about.
No really, OPEC and US oil companies want to make money? Who knew? Yes, I knew that they shut down wells due to lack of demand caused by the pandemic. It takes money to reopen those wells to drilling. They just don't flip a switch and walk away. There has to be profit in restarting production. Funny how Biden wants to restrict US oil production; but then begs OPEC and Russia to expand theirs. By the way- OPEC even told Biden to have the US pump their own if he was concerned about the world supply.
Why would OPEC increase their production when the US isn't increasing it's production?
Want to know what makes the US oil companies hesitant to reopen those wells and start new ones- dumb EO's that will require them to invest more money to lower methane emissions.
US oil companies aren't going to do anything until they see what the involved costs are from Biden's EO. This isn't stopping Joe from launching and investigation into US companies for price gouging.
Please don't act like Biden wants drilling on federal lands. A US court told Biden he couldn't pause drilling on federal lands.
So sales are going on in spite of Biden's wishes. He is not doing anything that he isn't forced to.
Oil production is by private companies, not the US government. Oil from the US is sold to anyone willing to pay. Are you proposing the US make a law forcing private companies to produce more oil AND only allow them to sell to the US?
If it was only as easy as flipping a switch.
Here is quite an interesting article, opens up a lot of questions as well.
Here's another, seems that many of those good/bad boyz see the light:
Oil and Gas Majors Focus on Renewable Energy, Hydrogen, and Carbon Capture
Renewable Energy, Hydrogen, and Carbon Capture look good on paper, but come nowhere close to filling the gap
The US had become energy independent before Biden