Biden Wants Major Oil Reserve Sales. That’s Not Easy in Asia

(Bloomberg) -- Dwindling inventories and concerns over energy security in key Asian economies may hamstring U.S. efforts to arrange for a sizable and coordinated release of strategic crude reserves in a bid to rein in prices and tackle inflation.

Government-held stockpiles across many countries have edged lower this year, according to data compiled by Bloomberg. That’s limiting the region’s ability to flood markets as part of any potential effort with Washington, traders and analysts said, although the sale of small volumes are possible after OPEC+ snubbed calls for a quicker return of supplies to calm prices.

The bulk of Asia’s strategic reserves is held in China, where inventories have slipped as rebounding prices discouraged restocking this year. Beijing said Thursday it’s releasing some oil from reserves, with details to be announced. In India, the hoard stands at less than a week of the nation’s consumption after several tanks were converted from strategic to commercial use.

This week, President Joe Biden and his Chinese counterpart Xi Jinping discussed the merits of releasing oil to ensure stability in global energy markets. China said an SPR release is in the works, although it’s unclear if authorities are doing so in response to Washington’s invitation, or whether it had prior plans to do so. 

The impact of releases of reserves from the U.S. and other countries is already priced into global oil markets, Goldman Sachs Group Inc. said in a note. The drop in prices reflects expectations for more than 100 million barrels to be released, it said.

The U.S. has also been rallying others across the region, although India and Japan have expressed reluctance to tap their stockpiles as they’re meant for acute supply disruptions or emergencies such as force majeures.

Here’s a snapshot of the strategic reserves held by Asian countries:

China:

India:

• Government-owned strategic crude stockpiles currently at about 3.5 million tons (or about 26 million barrels)
  • That’s the equivalent of less than a week of India’s consumption
• The nation has a total strategic storage capacity of 5.33 million tons across Mangalore, Vizag and Padur. Some of these tanks have been leased out to Abu Dhabi’s Adnoc, or emptied to make space for commercial usage and support local refiners
  • India’s government can tap on the entire volume of oil stored in strategic tanks in the event of an emergency

Japan: 

South Korea: 

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