Oil prices rose in early trading on Tuesday as investors awaited the new US and European sanctions against Moscow for alleged Russian war crimes in Ukraine. This has heightened fears of problems with oil supplies as talks with Iran on resuming the nuclear deal are stalled, Reuters reported.
At 9:35 a.m. Bulgarian time, Brent rose $ 1.74, or 1.62 percent, to $ 109.3 a barrel, while US WTI light crude rose $ 1.66, or $ 1.61. %, to $ 104.9 per barrel.
The two benchmarks rose more than $ 2 a barrel in early Asian trade after Japanese Industry Minister Koichi Hagiuda said the International Energy Agency (IEA) was still working on a planned second coordinated oil release within a month.
Oil prices rose more than 3% on Monday due to the threat of new sanctions against Russia over the killing of civilians in Ukraine, as well as a pause in talks to revive Iran’s nuclear deal, which could lead to the more Iranian oil market. Iran has blamed the United States for halting talks.
“Geopolitical tensions are likely to continue to push up oil prices in the coming days, despite efforts by the United States and its allies,” said Tina Teng, a market analyst at CMC Markets APAC & Canada.
“In the long run, oil prices may continue their upward trajectory due to supply shortages and demand hedging to counter high inflation,” she added.
Consulting firm Wood Mackenzie said Monday that EU members and developed economies, including Japan and South Korea, could trade about 650,000 barrels a day of Russian crude oil with similar grades and volumes, mostly from the Middle East, which are common. go to China and India.
Indian State Refinery Mangalore and Petrochemicals Ltd. bought 1 million barrels of Russian Urals oil in May due to a serious discount.
What is the biggest release of oil from the US strategic reserve?
US President Joe Biden has announced the release of one million barrels of crude oil a day from the US Strategic Reserve (SPR) for the next six months.
Cooling the market
The measure is a direct consequence of the Russian invasion of Ukraine, which has intensified the instability of oil markets and sharply raised the price of black gold on world markets.
The release is the largest ever in history and amounts to a total of 180 million barrels, which is equal to world oil consumption in two days.
The United States is releasing oil from its strategic reserve for the third time in six months.
Intervention of the International Energy Agency
It is possible today that the International Energy Agency (IEA), which includes 30 other developed countries but not Russia, will announce that it is also releasing oil from its strategic reserve.
On March 1, the IEA announced for the fourth time in its history the release of oil from its reserves. It is about 60 million barrels, which is the largest in the history of the organization.
As part of the move, the United States announced the release of 30 million barrels of its reserves.
In November 2021, Washington announced in tandem with China the release of 50 million barrels, but the move was unsuccessful as prices continued to rise due to increased demand as a result of the economic recovery following the Kovid-19 pandemic.
Why was the strategic reserve created?
The United States established its strategic reserve in 1975 after the 1973 Arab oil embargo sharply raised fuel prices and hit the world economy.
US presidents have used the reserve so far to calm oil markets during wars or when the oil infrastructure off the coast of the Gulf of Mexico has been damaged by a hurricane.
What does the reserve contain?
The U.S. reserve currently contains about 586 million barrels of oil located in several dozen natural repositories in four heavily guarded locations off the coast of Louisiana and Texas. The country also maintains a small reserve of oil and gasoline in the northeastern United States.
How will oil reach the markets?
Because it is located close to major US refineries and petrochemical complexes, the US reserve can market up to 4.4 million barrels per day. It takes less than two weeks for the presidential order to be implemented and the first barrels to be put on the market, according to the energy ministry.
If oil is sold, the ministry holds online auctions in which energy companies bid to acquire the desired barrels.
If swaps are made, the companies receive oil but are obliged to return it together with interest after a predetermined period.
In addition to the last six months, the US president has allowed emergency sales from the strategic reserve three more times – in 2011 during the riots in Libya, in 2005 after Hurricane Katrina, and in 1991 during the First Gulf War.
Swap deals have been resolved more frequently, the most recent being in September 2021 following Hurricane Ida.
Which other countries maintain a strategic reserve?
The United States has about half of the world’s strategic oil reserves. Together with the other IAEA member states, including the United Kingdom, Germany, Japan, and Australia, they are obliged to guarantee a reserve equal to 90 days of net oil imports.
Japan has the largest reserves after the United States and China.
China, an associate member of the IEA and the world’s second-largest oil consumer, set up its strategic reserve 15 years ago and held its first oil auction in September 2021.
Another associate member of the IEA, India, the world’s third-largest importer and consumer of oil, also maintains a strategic reserve.
The state oil reserves of the member countries of the Organization for Economic Co-operation and Development (OECD), many of which are also members of the IEA, amounted to 1.2 billion barrels in January.
