There is increasing speculation that the coordinated release of oil reserves is fighting accelerating inflation.
As concerns about accelerating inflation have intensified, there are signs that the United States, China, and Japan are all preparing to use their own crude oil reserves, and oil prices continue to fall after four consecutive weeks of decline.
New York futures fell below US$76 per barrel after falling nearly 6% last week. US President Joe Biden has been talking about the possible release of strategic oil reserves for several weeks. The Yomiuri Shimbun reported on the weekend that Tokyo may jointly announce the matter with Washington as soon as this week.
China said last week that it was working to make another sale from its national inventory.
At the same time, the re-implementation of virus restrictions in Europe shows that the re-epidemic Covid-19 may still pose a threat to global energy demand. Austria will complete a complete lockdown on Monday, while Germany and other countries are cracking down on unvaccinated people due to a surge in cases.
Due to increased speculation that the United States and other countries will release reserves, oil prices have fallen from their highs at the end of October.
Sales in any country need to be considerable in order to further drive prices. Goldman Sachs Group said last week that the impact of about 100 million barrels of reserve auctions has been absorbed by the market.
However, the internationally coordinated release will send a strong message to the OPEC+ alliance, which has so far rejected calls for a faster restoration of supply. Biden and Chinese President Xi Jinping discussed the benefits of using strategic reserves in their meeting last week.
“The United States has been discussing for a few weeks, but they have done nothing,” Vandana Hari, founder of Vanda Insights, said of the release of strategic reserves. “The fact that they did not do this during the multi-year peak period indicates that they are unlikely to take action. Due to the outbreak in Europe, oil prices are falling, which means that the pressure is already easing.”
Japan’s “Yomiuri Shimbun” cited government reports that Japan’s oil reserve law does not allow the sale of reserves at high prices, but the current reserves held by the government and the private sector exceed the minimum requirements stipulated by the law. source.
It said that Tokyo is considering releasing some of the excess reserves, and it believes that these excess reserves can be sold without violating legal restrictions.