The National Reserve Bureau of China plans to release crude oil volumes from its Strategic Petroleum Reserve (SPR). Details will be disclosed on its website.
After OPEC+ rejected Biden’s pressure to extract more crude oil, the US government has lobbied Asian countries such as China, India, Japan, and South Korea to release reserves. US President Joe Biden and Chinese President Xi Jinping discussed the benefits of releasing oil from strategic reserves at a virtual summit this week.
“High oil prices, especially the US retail price of gasoline, have become a concern for oil-importing countries. Unsuccessful at influencing OPEC+ to increase supply and ease prices, the US has for a while considered the other tools at its disposal to add supplies to the market,” said Bjornar Tonhaugen, Head of Oil Markets, Rystad Energy.
The news that China is carrying out crude oil release preparations, although without providing further details, is putting further downward pressure on prompt crude prices.
“The market is currently left guessing on the size and timing of a possible Chinese SPR release. Judging by the mild negative reaction in prices today, the market seems to be expecting a limited amount – which in any case would be auctioned to Chinese refiners,” said Bjornar.
“To put numbers in perspective, the first ever SPR release by China in the autumn of 7.4 million bbl is less than a day’s worth of Chinese crude imports. To meaningfully impact prices over a month, a release in the magnitude of 30 million bbl or more, say 1 million b/d, would move the needle on prices more to the tune of 5% or more,” he said.
“While what happens from here remains highly uncertain, it is not unlikely that China’s move may be accompanied by releases by the US and/or other IEA member countries. Such a development would definitely add extra bearish weight on prices,” Bjornar continued.
Expectations for robust demand into the new year have prompted Asian crude buyers to return more firmly to the market to secure cargoes for the start of the new year.
Meanwhile, 2022 oil market views among analysts are diverging, from ultra-bullish calls of above $100/bbl to forecasts that reprieve is just around the corner in first-quarter 2022 when global balances may flip to surplus.