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The U.S. will release 50 million barrels of crude from its strategic reserves in concert with China, Japan, India and South Korea and the U.K — an unprecedented, coordinated attempt the world’s largest oil consumers to tame prices that could prompt a backlash by OPEC+.
Of that amount, 32 million will be released from the U.S. Strategic Petroleum Reserve as an exchange over next several months, while 18 million will be as an accelerated release from previously authorized sale, the White House said in a statement Tuesday.
A Biden administration official told reporters Tuesday that barrels would begin moving as early as mid- to late December. The administration is prepared to take further, unspecified steps, if needed, the White House said.
West Texas Intermediate crude for January delivery dropped 1.5 per cent to US$75.61 a barrel as of 7:19 a.m. in New York.
The decision to collectively discharge stockpiled crude after OPEC+ countries rebuffed calls to significantly boost production marks a diplomatic win for the U.S. and a challenge to the grip that Saudi Arabia, Russia and other OPEC+ producers have on the market.
But it’s not without risk. OPEC+ officials warned they’re likely to respond by cancelling plans to boost their own production, negating the addition of stockpiled oil onto the market. The standoff sets up a fight for control of the global energy market.
The tussle threatens to roil the geopolitics of oil. At stake is the price of the world’s most important commodity as politicians and central bankers contend with the strongest inflationary surge in more than a decade. It also shows the strained relationship between Washington and Riyadh, traditionally a cornerstone of U.S. relations in the Middle East.
President Joe Biden has been seeking the joint release for weeks, including during a virtual summit with Chinese President Xi Jinping. Ultimately, China was among that countries that agreed to the move, which represents the largest privately arranged discharge of stockpiled crude from major economies. Previous global efforts to tap stockpiles — such as the 2011 release of 60 million barrels in the wake of unrest and supply disruptions in Libya — were coordinated by the International Energy Agency.
