The Centre is considering a proposal to release its strategic oil reserve in coordination with other countries in a show of resentment against high oil prices, backing the US plan for collective buyers action to send a strong signal to producers that have artificially curbed supplies.
According to a report in the Economic Times, top officials of the petroleum and external affairs ministries were working late on Monday to arrive at the most optimal response to the Biden administration’s call to coordinate the emergency stock release.
A final call to release oil from the strategic reserves will be taken at the highest level, the financial daily mentioned citing an unnamed person with knowledge of the matter said. An announcement in this regard may come as early as today, he said.
Worth mentioning here is that China is already on board while Japan is considering the US proposal. If China, Japan, India, South Korea, and the US finally agree to a coordinated release, it will be the first such instance in the history of the oil market.
“This will be an expression of resentment against high oil prices,” the person cited above told ET. The volume of oil as well as the timing of the release are still being worked out.
The quantity of oil released from the strategic reserves of each country may not be very large but synchronised action by the world’s top consumers will send a strong signal to OPEC+, the producers’ cartel that has reined in supply despite a rapid recovery in demand and a price surge.
It may be noted that the US urged key consumers to coordinate the release of oil from their strategic reserves after OPEC+ ignored President Joe Biden’s call to step up supplies earlier this month. Similar calls by India, Japan and other consumers too have had little effect. A coordinated release is expected to temporarily calm prices that are generating a political backlash against governments in the US, India and many other countries.
India and other nations have created strategic reserves mainly to meet supply disruptions, and not to tackle high prices. Prices are high mainly because of supply shortage and a coordinated release can help meet that deficit, said the person cited above.
Just the news that the US and other countries are considering synchronised action to influence the oil market has lowered prices by a few dollars per barrel in the past few days. Brent crude is now hovering around $79 per barrel Analysts expect the coordinated release to have a temporary effect on prices, but believe it may pressure OPEC+ to step up supplies.
