The US-led coordinated release of oil reserves
The release of oil from petroleum reserves could delay the recovery by a couple of months if OPEC+ decides to compensate
The US announced on Tuesday, 23rd November, that it will release 50 million bbls of oil from its strategic petroleum reserves (SPR) in coordination with other IEA members China, India, South Korea, Japan and the UK.
The US will release 50 million bbls from SPR beginning in December-2021 through April-2022, some of which will be on loan and other being an outright sale. India has announced to release 5 million bbls whereas the UK will allow commercial inventories to be drawn down by 1.5 million bbls. China, Japan and South Korea have agreed to participate, although they haven’t yet announced the volumes. Overall, it seems that this US-marshalled effort to keep a check on oil prices will draw down inventories by some 60-70 million bbls, which is somewhat below our Base Case expectations.
The more important question for the tanker market is how will the OPEC+ respond to this plan? The coalition is meeting on 2 December and if it compensates by deciding to increase production at a slower pace than the current plan, it could delay the tanker market recovery in our Base Case by 2-3 months.
We are monitoring the situation closely as other participating countries announce their plans and we will also be watching the developments at the OPEC+ meeting in a week from now. We will get in touch with our clients if there are significant revisions to our most recent Base Case, which was distributed on 19 November.