Chinese reserve release fails to arrest oil price rise
China tapped its strategic oil reserves for first time in order to battle rising prices
Oil prices rose at the start of the week, despite the Chinese government intervening to arrest runaway fuel costs.
On Sunday, China announced the release of strategic gasoline and diesel reserves. Earlier this year, the world’s second-largest economy tapped its strategic oil reserves for the first time on record in order to battle rising prices.
In a rare statement the National Food and Strategic Reserves Administration said: "The rotation of gasoline and diesel from storage this time will be used to increase market resources, ease supply tensions, and give play to the regulatory role of the national refined oil reserve market.”
Soon after, a spokesman for Sinopec Corp said that the nation’s largest oil refiner, would increase diesel supply by 29% on a year-on-year basis and utlise its full domestic refining capacity in order to improve market supply.
Although it had an initial effect on market sentiment, China’s intervention was soon offset by the Organisation of the Petroleum Exporting Countries and its allies including Russia.
Attention quickly shifted to OPEC+’s upcoming meeting on 4 November and the falling likelihood of an acceleration in the easing of production limits.
At a meeting of the Group of 20 nations in Rome over the weekend United States President Joe Biden, in conjunction with other world leaders, stressed the importance of tackling climate change and supporting the transition to more sustainable forms of energy.
Such sentiments will be further outlined this week at the 26th annual meeting of the conference of parties under the UN Framework Convention on Climate Change in Glasgow, Scotland.
In the more immediate term, however, with US gas prices at a 7-year high, the US president has called on OPEC to increase output.
With prices at the pumps in the US at a 7-year high, US energy diplomat Amos Hochstein recently admitted that the world’s largest economy had found itself “in an energy crisis”. He added: “Producers should ensure that oil markets and gas markets are balanced.”
On Friday, Saudi King Salman bin Abdulaziz pledged to the G20 that the “Kingdom will continue its leading role in economic and health upturn and recovery from the global crises, and in finding a balance to achieve security and stability in energy markets.”
Any acceleration of the current output increase of 400,000 barrels per day each month would require the unanimous approval of OPEC members. With from member states such as Kuwait, Angola and Iraq all publicly voicing their support for the current schedule, the continued imbalance between supply and demand is expected to continue.
By 12:15 (GMT), spot Brent crude traded up by 1% at $84.31 per barrel.