Japan, South Korea join US in SPR release

Japan and South Korea are joining the US and other oil-consuming nations in releasing crude from strategic reserves, as part of a global effort to reduce fuel prices that have hit a seven-year high.

The Japanese government announced today that it will release several million barrels of crude oil from its strategic reserves. The move brings forward scheduled crude sales from strategic reserves and is not aimed at lowering oil prices, the trade and industry ministry (Meti) said. Details such as the exact volume and timing are unclear. Japan last issued a tender to sell crude from its strategic oil reserves in May.

Japan's stockpiling law does not allow sales from the country's strategic reserve to lower oil prices. The move to bring forward the sales schedule takes into account current crude prices and US co-ordination efforts to prevent a surge in oil prices from negatively affecting the global economic recovery, Meti said.

Retail regular grade gasoline prices reached a seven-year high of $3.41/USG earlier this month in the US, prompting President Joe Biden to order the US to draw down up to 50mn bl of crude from its Strategic Petroleum Reserve (SPR) as part of a co-ordinated release with China, India, South Korea, Japan and the UK.

South Korea also announced plans today to participate in the joint release of oil reserves but did not provide details such as the timing and volume.

The specific scale, timing and method of release of oil stocks will be specified later, but it is expected to be at a level similar to that of previous IEA international co-operation cases, the trade, industry and energy ministry said. "At the time of the Libyan crisis in 2011, about 4pc of the oil reserves, or 3.467mn bl, were released," it said.

China has yet to release details of any potential drawdown. But US bank Goldman Sachs estimates crude reserve releases from South Korea, Japan, China, India and the UK to total as much as 30mn bl.

India has agreed to release 5mn bl of crude from its strategic stocks at an unspecified time, while the UK has authorised companies to voluntarily release the equivalent of up to 1.5mn bl of oil held in reserves.

But markets appear to have expected a larger strategic reserves release. The Ice front-month January Brent contract was at $82.59/bl at 08:30 GMT today, up by 28¢/bl from its settlement on 23 November.

"The SPR releases are less than expected… and the US is releasing crude, not gasoline, which is the main problem here," a Singapore-based trader told Argus.

The global oil release comes as the Opec+ group is set to meet on 2 December to discuss whether to stick with long-term plans to raise production.

By Reena Nathan and Maiko Nakashima