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U.S. again presses OPEC+ as it weighs reserve release

Published 11/18/2021, 12:47 AM
Updated 11/19/2021, 03:36 PM
© Reuters. FILE PHOTO: A crude oil tanker is seen at Qingdao Port, Shandong province, China, April 21, 2019. REUTERS/Jason Lee/File Photo

© Reuters. FILE PHOTO: A crude oil tanker is seen at Qingdao Port, Shandong province, China, April 21, 2019. REUTERS/Jason Lee/File Photo

By Timothy Gardner and Alexandra Alper

WASHINGTON (Reuters) - The White House on Friday pressed the OPEC producer group again to maintain adequate global supply, days after U.S. discussions with some of the world's biggest economies over potentially releasing oil from strategic reserves to quell high energy prices.

The Biden administration has asked a wide range of countries, including China for the first time, to consider releasing stocks of crude. President Joe Biden faces slipping approval figures as Americans cite inflation as a growing problem.

White House spokeswoman Jen Psaki said the administration wants to "ensure that the OPEC member countries and OPEC as an organization meets the demand needs that are out there with the adequate supply. That is something we've pressed them on in the past."

Oil prices were down sharply after Austria announced it would impose a full lockdown due to rising COVID cases, with Germany likely to follow.

Members of the Organization of the Petroleum Exporting Countries and allies have said the world economic recovery is fragile. This week, Secretary General Mohammad Barkindo said OPEC expects an oil supply surplus to begin building next month.

International benchmark Brent crude was down 3.3% on Friday to $78.62 a barrel, lowest since early October. The market has been weakening as investors have anticipated an increase in global supplies. [O/R]

OPEC+ plans to meet on Dec. 2. The group has been raising output by 400,000 barrels per day (bpd) per month, gradually unwinding record production cuts made in 2020 when the pandemic dissipated fuel demand.

Biden faces political pressure ahead of midterm congressional elections next year. A Reuters poll in October showed 67% of U.S. adults agreed inflation is a major concern.

Biden recently directed the U.S. Federal Trade Commission (FTC) to look into the growing disparity between unfinished wholesale gasoline futures, which have dropped sharply in recent weeks, and retail prices, which have barely budged.

The average cost per gallon is $3.41 nationwide, according to the American Automobile Association.

Other countries have been pressing OPEC, including China and India.

OPEC+ in April 2020 cut output by more than 10 million barrels a day as pandemic lockdowns crushed fuel demand.

The producer group still has about 3.8 million bpd in supply cuts that it has not yet returned to the market. Several members have been unable to meet production targets due to years of under-investment. The group fell short of its targets again in October, as several nations had difficulty reaching proposed output levels.

"Half of its members can’t meet their quotas given their own under-investment. This complicates changing quotas as such a decision needs to be unanimous," said Goldman Sachs (NYSE:GS) analysts in a note.

Graphic: U.S. & Brent crude oil futures slip after U.S. govt requests that some big oil buyers sell reserves - https://fingfx.thomsonreuters.com/gfx/ce/mopanloklva/USvsBrentNov182021.png

The United States has the largest strategic reserve at more than 600 million barrels. The U.S. SPR was set up in the 1970s after the Arab Oil Embargo to ensure adequate emergency supplies.

In recent years, the shale boom has boosted U.S. output to rival that of Saudi Arabia and Russia, making the United States to less dependent on imports from other nations, particularly OPEC members.

© Reuters. FILE PHOTO: A crude oil tanker is seen at Qingdao Port, Shandong province, China, April 21, 2019. REUTERS/Jason Lee/File Photo

The United States and allies have coordinated strategic petroleum reserve releases before, such as in 2011 when supplies were hit by a war in OPEC member Libya.

Graphic: U.S. crude oil in Strategic Petroleum Reserves - https://fingfx.thomsonreuters.com/gfx/ce/klpykdleepg/USCrudeSPRNov2021.png

Latest comments

Great idea !! Release the Cracken !! (Oil Strategic reserves AND drillers ). Oh. That's right. She's already out.
And once they release and the market price drop as it absorbs it, then what? prices will start rising again. Release the drillers to start drilling again.
Germany is on record as of today, no lockdown.
reuters and CNN have alot in common this is fake news
I found this article for you: - http://www.investing.com/analysis/energy-report-will-they-wont-they-200608940
Maybe we could help our producers produce? No?
Maybe we could allow our producers to produce? No?
Why not just have our allies put nore EVs on the road?
Isn't this what Biden wants? That we move away from hydrocarbons. A high oil price is a good way to accelerate new energies. Looks like the economy is still the driving force here. And of course, the infrastructure bill will require an enormous amount of hydrocarbons. A dollar less per barrel will already save the US government 100's of millions.
 I have no premeditated personal desires, as much as oil longs (like yourself?) may not have for wanting higher crude prices. Does that make sense? Hope it does. Because, then you'll waver from picking on my so-called bias that you're implying. I write from the perspective of a person who's concerned about the economic ails caused by high oil prices. But I have also criticized the Biden administration's poorly thought-out energy strategy thus far. Case in point is this weekly review published on Sunday ( https://www.investing.com/news/commodities-news/energy--precious-metals--weekly-review-and-calendar-ahead-2678855). Open that link from a desktop browser. You'll notice from the comments of the readers there that it is as balanced a view on oil that you can get. And with "facts" too.
 Appreciate the clarification on typos; no worries about that, mate.
I am not in oil at the moment. Now that Covid risk is better understood than a year ago I was researching and read the articles. I read comments to get readers take on the writers. I saw yours and it seems Bias so thats why I asked you because I read articles you wrote prior. Appreciate your responses and clarification. Thanks once more for your contribution and take in supporting the investing community.
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