India to release 5 million barrels of crude oil from strategic reserves
India is among the world's top oil consumers that will release oil from strategic reserves to calm prices in an unprecedented, coordinated challenge led by the US to the OPEC+ producers' cartel that has curbed supplies. The US is set to release 50 million barrels and India 5 million barrels.
Oil prices were little changed at around $80 per barrel after the announcements as traders expect OPEC+ to respond to the buyers' move.
The oil will be released "in parallel and in consultation with" the US, China, Japan and South Korea, the oil ministry said in a statement, without specifying a timeframe. The US administration said Britain will also be part of the coordinated release.
ET reported Tuesday that India could join other top energy consumers in tapping strategic reserves and that an announcement was likely later in the day.
The release from the US strategic reserves, one of the biggest ever, will start hitting the market in mid-to-late December.
All Eyes on OPEC+
Of the 50 million barrels, 32 million will be released from the US reserves as an exchange over the next several months, while 18 million will come from an accelerated release from previously authorised sales.
A release of 50 million barrels is equivalent to an OPEC+ production increase of 1.6 million barrels per day (bpd) for one month, Commerzbank analyst Carsten Fritsch told Reuters. OPEC+, a group of nearly two dozen oil-producing countries led by Saudi Arabia and Russia, has been adding 400,000 barrels per day of incremental supply every month for the last few months.
India's planned release of 5 million barrels is equivalent to a day of oil consumption by the country, which has reserves of about 38 million barrels. In India, the stocks will be released to state-run refiners Hindustan Petroleum and Mangalore Refinery and Petrochemicals Ltd (MRPL) from the caverns located in Visakhapatnam and Mangaluru, respectively.
"The quantum that we are releasing is small but the symbolism is strong. All top consumers coming together drives home the point that buyers can go beyond pleading to OPEC+ and can act to protect their interests," said an official who didn't want to be named.
The Biden administration began persuading top oil consumers earlier this month to join a coordinated release of oil to cool off the market after OPEC+ ignored his calls to step up supplies. Calls from India, Japan and other consumers too have been ignored in the past. With pump prices rising and his approval ratings falling ahead of next year's mid-term Congressional elections, Biden chose to tap strategic reserves in coordination with others.
"India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces," the oil ministry said in the statement. "India has repeatedly expressed concern at supply of oil being artificially adjusted below demand levels by oil-producing countries, leading to rising prices and negative attendant consequences."
Analysts expect OPEC+ to respond to the buyers' challenge when the members of the cartel meet for a monthly review in early December. OPEC+ officials have reportedly warned they may consider canceling plans to boost their own output to negate the additional supply from strategic reserves in the market.
"The market focus has shifted from the release to how OPEC+ will respond to what the White House is calling a 'message to the Saudis'," Bob McNally, president of consultant Rapidan Energy Group and a former White House official under President George W. Bush, told Bloomberg. "If it comes to a test of wills and capabilities between a handful of strategic oil reserve holders led by the US and OPEC+, the market would probably bet on the latter prevailing."
The Economic Times 24-11-2021