The United States has requested China to join it in releasing strategic oil reserves to help stabilize soaring international crude oil prices as part of ongoing discussions on economic cooperation between the two countries, SCMP reported on Nov. 17.
The issue was raised during the online meeting between Chinese communist leader Xi Jinping and U.S. President Joe Biden on Tuesday, according to a person with knowledge of the matter.
Two days earlier, the subject was also broached during a phone call between Chinese foreign minister Wang Yi and U.S. Secretary of State Antony Blinken.
“One of the pressing issues for both sides is energy supply,” the person, who asked to be unidentified as the information is not public, said.
“Currently, the energy departments from both sides are negotiating the details,” the person said, adding that China is open to the U.S. request but has not committed to specific measures yet, citing the necessity to account for its domestic consumption needs.
According to Reuters, the global oil industry’s slow response to the surging demand in 2021 has been responsible for soaring energy costs and inflationary pressures worldwide.
Benchmark oil prices have jumped to multi-year highs over $86 a barrel, and some economists warn crude could exceed $100 a barrel, threatening the recovery.
Moreover, U.S. inflation jumped above 5 percent for six straight months, SCMP reported. The U.S. inflation rate hit 6.2 percent in October.
Earlier this month, the Organization of Petroleum Exporting Countries (OPEC) and its allies declined a U.S. request to produce more crude. U.S. West Texas Intermediate, a crude benchmark, is up 67.5 percent year to date.
“We need immediate relief at the gas pumps and the place to look is the Strategic Petroleum Reserve,” Senate Majority Leader Chuck Schumer was quoted by Reuters as saying on Sunday.
The U.S. has the world’s largest reported strategic petroleum reserve at 727 million barrels, while China has about 200 million barrels and is by far the largest importer of crude oil worldwide. If the two countries take action together, it will create a strong effect on global oil prices, according to SCMP.
Whatever China decides, Washington will probably announce—as early as next week—that it will start to gradually release strategic petroleum reserves into the market early next year, SCMP added.
Wang Yongzhong, a senior energy researcher with the Chinese Academy of Social Sciences, a Beijing-based governmental think tank, said that the current crude price of around U.S.$80 per barrel is not high enough to urge China to release its strategic reserves immediately.
“From a technical perspective, it’s not the time for China to do so. But the U.S. indeed has the motivation because of its high inflation,” he said. “However, both countries, as big consumers, have shared common interests in curbing crude prices.”
Although China has built a strategic oil reserve in the past 14 years, Wang estimates that its crude reserve is equivalent to about 40-50 days of its imports, compared to the U.S. size of 90 days of consumption.
China declared a plan to sell some strategic crude reserves in September without revealing the amount. But the move was seen by analysts as a regular rotation of storage facilities.
As the world’s largest crude importer, China bought 542 million tonnes last year, a year-on-year increase of 7.3 percent. Customs data showed that its January-October imports dropped 7.2 percent from a year earlier to 425 million tonnes.