India says 'no use' as US asks Asian giants to tap oil reserves

NEW DELHI: Oil prices slipped below their seven-year highs of $80 a barrel on Thursday after reports from Washington said the US has sought a co-ordinated release of strategic crude reserves by India, China, Japan and South Korea with a view to taming prices, a move New Delhi said was futile as it would have little impact.
“Strategic oil reserves weren’t ever intended for a situation like this… It’s for a force majeure situation, if there’s an earthquake, a global outbreak of hostilities, and oil supplies are shut,” India’s oil minister Hardeep Singh Puri told Bloomberg TV on Wednesday when the news broke.
Still, global benchmark Brent slipped below $80 a barrel-mark for the first time in six weeks as mounting worries over rising Covid cases in Europe and predictions of a warmer winter weighed. Words on China preparing to sell some of its reserves to domestic refiners added to the downward pressure.
Together with the US, the four Asian economies make up the world’s top five oil consumers. At 39 million barrels against a daily demand of nearly 5 million barrels a day, India’s strategic reserves are a fraction of 714 million barrels of the US, 475 million barrels of China and 324 million barrels of Japan, which, under law, cannot tap the reserves for market intervention. Even then, altogether, the reserves make up 15 days of supply globally, currently pegged at 99 million barrels a day.
The move by the Joe Biden White House appears to be an attempt at deflecting pressure at home as Americans smart under high fuel prices and sending a signal to the OPEC+ grouping after it rebuffed appeals for calming prices. At home, Biden is under pressure to tap into reserves and ban oil exports.
India appears to be in the same boat as the US. Puri, who attended the meet, told Bloomberg TV, “I have spoken to my counterparts from Saudi Arabia, the UAE, Russia” and made a “concerted push” on oil production (raising output)." Separately, he told CNN, "There are five million barrels sitting there but they (OPEC) are not producing."
Feedback on discussions among energy ministers of oil exporting and consuming countries at the just-concluded ADIPEC oil industry meet at Abu Dhabi suggest OPEC is set to maintain current production levels as build-up in inventories indicate no supply risk.
The best India, which imports 85% of its oil needs, can hope for is oil stays range-bound to provide some headroom as the economy tries to shake off pandemic pangs in the last quarter of 2020-21 fiscal.