US Orchestrate Call on Oil Big Importing-consuming Club to Mull Drawdown from their Respective Reserves

US-led Biden administration have, reportedly, asked some of the largest oil importing-cum-consuming club, in the world, including China, India and Japan, to study using their crude reserves, in a concerted effort, to lower oil prices and stimulate economic recovery, according to Reuters quoted sources.

This unusual demand took place, as Biden is resisting political pressures, due to high gasoline prices and other consumer costs, because of the recovery of economic activity from its low levels, during early periods of the pandemic.

It also reflects growing US frustration with the OPEC (proper) and its allies, widely known as OPEC+ grouping, including Russia, which has rejected Washington’s repeated requests to speed up its oil production increases.

“We are talking about the symbolism of sending the world’s largest oil consumer a message to OPEC+, that you have to change your behavior,” one of the sources said.

In Asia, China said that it was working to withdraw from its oil reserves, while oil prices continued their latest losses, affected by American demand, after falling on Wednesday more below the highest level, in seven years, recorded in early October.

Biden and his top aides have discussed the issue, in the past few weeks, with close allies such as Japan, South Korea and India, as well as with China.

The United States and its allies had previously coordinated withdrawal from their strategic oil reserves, in situations, such as during the war in Libya, a member of OPEC, in 2011, according to Reuters.

The current proposal presents an unprecedented challenge to OPEC, the American jargon dubbed as a (cartel), that has influenced oil prices for more than five decades, because it includes China, the world’s largest oil importer.

In Japan, an Industry Ministry official said that the United States had requested Tokyo’s cooperation, in the face of high oil prices, but he did not confirm whether the request, included a withdrawal from reserves to lower prices.

China’s Government Reserves Office said it was working to draw down crude oil reserves, but declined to comment on the US request.

In a related context, a South Korean official confirmed Washington’s request from Seoul, to use some of its oil reserves.

We are carefully reviewing the American demand, but we are not withdrawing from the oil reserves, because of the high oil prices, he said. We may use some of the oil reserves, in the event of a supply disruption, but we are not facing high oil prices.

A US source involved in the discussions also said that the US share of any potential withdrawal from the reserves, would have to be more than 20-30 million barrels per day, in order to affect the markets.

This withdrawal may be in the form of selling or borrowing from the Strategic Petroleum Reserve.

The United States resorted to creating a strategic oil reserve, in the 70s of the last century, after the Arab oil embargo, to ensure that it had sufficient supplies, to meet emergencies or contingencies..

A few well-informed sources cautioned that such negotiations have not reached their final stage, and have not reached any final decision, regarding the continuation of this endeavor or any other course of action, regarding oil prices.

The White House declined to comment on the details of the content of the consultations with other countries. “No decisions have been made,” a spokesman for the White House National Security Council said.

The White House has been saying for weeks that it is “talking with other energy consumers to ensure global energy supply and prices, that do not jeopardize the global economic recovery, its spokesman added.

It is noteworthy that oil prices fell after Reuters reported the news of the White House talks, as Brent, the world benchmark blend, fell below $ 80 a barrel.

OPEC + pumps about 400,000 barrels per day to the world market per month, but it is resisting Biden’s calls for more rapid increases, arguing that the demand recovery may be fragile.

On Tuesday, the Secretary-General of OPEC (proper) Muhammad Barkindo, said he expected a global supply surplus to appear, as soon as December, the in-coming.

These are indications that we have to be very careful,” he told reporters.

Rising oil prices angered Biden-administration, ahead of the 2022 congressional elections, that will determine whether his Democratic Party, retains its slim majority, in both chambers of Congress.

Gasoline prices averaged $3.41 a gallon, in the United States recently, according to the American Automobile Association, an increase of more than 60% from last year, as the economy recovered from the pandemic.

Many of Biden’s aides attribute his low approval ratings, in the past few months, to rising inflation from energy to food and other sectors, especially, due to the supply chain disruptions or interruption.

The consumer price index has risen 6.2% over the past 12-month, with the energy component of the index, remarkably and particularly, rising 30%.

The Paris-based International Energy Agency, which monitors oil reserves for members, including the United States, Japan and most Western countries, declined to comment.

In the past, the agency used to orchestrate withdrawal from reserves, that included several countries.

Global oil prices reached their highest levels, in 7-year, in late October, but supply did not rise, at a pace to match the increase, in demand, since.