27/11/2021
India, 5 million barrels;
Japan, the first batch of 4.2 million barrels is expected;
The United States, 50 million barrels, of which 18 million barrels have been approved by Congress...
On November 23, the US government announced that it would unite with multiple major oil consuming countries to release crude oil reserves in order to cool oil prices. In addition to the above-mentioned countries, the United Kingdom, Canada and South Korea also said they will participate in plans to release crude oil reserves.
On November 24, Chinese Foreign Ministry spokesperson Zhao Lijian also stated at a regular press conference that China will arrange for the release of national reserves of crude oil and take other necessary measures to maintain market stability in accordance with its own actual conditions and needs.
So many oil-consuming countries announced at the same time that they would jointly release crude oil reserves, which is rare in history. In fact, when this signal was revealed to the market just last week, international oil prices fell sharply.
However, after the United States officially announced the release of 50 million barrels of crude oil on the 23rd, the prices of New York Mercantile Exchange crude oil futures and London Brent crude oil futures rose by 2.28% and 3.27% respectively.
India, 5 million barrels;
Japan, the first batch of 4.2 million barrels is expected;
The United States, 50 million barrels, of which 18 million barrels have been approved by Congress...
On November 23, the US government announced that it would unite with multiple major oil consuming countries to release crude oil reserves in order to cool oil prices. In addition to the above-mentioned countries, the United Kingdom, Canada and South Korea also said they will participate in plans to release crude oil reserves.
On November 24, Chinese Foreign Ministry spokesperson Zhao Lijian also stated at a regular press conference that China will arrange for the release of national reserves of crude oil and take other necessary measures to maintain market stability in accordance with its own actual conditions and needs.
So many oil-consuming countries announced at the same time that they would jointly release crude oil reserves, which is rare in history. In fact, when this signal was revealed to the market just last week, international oil prices fell sharply.
However, after the United States officially announced the release of 50 million barrels of crude oil on the 23rd, the prices of New York Mercantile Exchange crude oil futures and London Brent crude oil futures rose by 2.28% and 3.27% respectively.
Why did international oil prices rise instead of falling?
Except that the significant drop in oil prices in the previous trading days has partially reflected the market's early digestion of this news, whether the specific measures announced by the United States are lower than market expectations may be a key factor. According to market forecasts, summarizing the releases of India, Japan, South Korea, the United Kingdom and other countries, the crude oil reserves released by the multi-country joint are expected to be 65 to 70 million barrels in the short term, while the global daily oil demand is about 1 Billion barrels.
In fact, the release of crude oil reserves will definitely have a huge impact on oil prices in the short term, but whether it can affect the market trend in the long term remains to be seen.
Can the release of reserves by major consumer countries effectively prevent the "crazy bull" in the crude oil market from rising? On the crude oil supply side, will this move trigger a counterattack from oil-producing countries? Will the production increase plans of major oil-producing countries shrink?
On the consumer side, the arrival of winter in the northern hemisphere has greatly increased the demand for oil, natural gas and other resources. Will this reduce the effect of releasing reserves? Against the background of high oil prices, carbon emission reduction and carbon neutrality, what impact will the energy consumption of green and low-carbon energy consumption have on the oil price trend in the longer period?
What is the historical effect:
Twenty years ago, the US released 29 million barrels, causing oil prices to fall by 28.8%
On November 23, local time, US President Biden announced the release of emergency oil reserves; then the Indian government announced that it would release 5 million barrels of strategic oil reserves; a British government spokesperson also said that the UK would allow privately held oil reserves to be released voluntarily ; On November 24, Japanese Prime Minister Fumio Kishida confirmed that some of the national oil reserves will be released...
Why do countries release strategic oil reserves so intensively? The biggest dominant factor is naturally the rising oil prices this year. In 2020, there was a so-called "negative oil price" in the U.S. crude oil futures market, but in 2021, oil prices rose all the way, and the New York crude oil futures price climbed to $85.41 at the end of October this year. /The high position of the barrel.
In a public statement on the 23rd, US President Biden made it clear that the current average gasoline price in the United States is 3.4 US dollars per gallon; in France, the oil price has even risen to around 7 US dollars per gallon. He emphasized that through measures such as the release of oil reserves, the problem of high oil prices will not be solved overnight, but it "will not take too long."
Biden also said that the price of crude oil fell by about 10% in the previous week, but the price of gasoline in the United States remained unchanged, indicating that major US oil and natural gas companies have acted to harm the interests of consumers. He has asked the US Federal Trade Commission to investigate this to ensure that consumers can obtain gasoline at a reasonable price.
In addition, reducing inflationary pressure is also an important consideration in making this decision. The latest data shows that in October this year, the US Consumer Price Index (CPI) rose by 6% year-on-year to 6.2%, a record high in 31 years.
Can the release of crude oil reserves have an impact on oil prices and inflation?
Longzhong Information analyst Wu Yan said that looking back at history, it can be found that, except for the limited impact of the U.S. release of strategic reserves due to the impact of Hurricane Harvey in 2017, the release of reserves at other time points has caused a downward trend in international crude oil prices. pressure.
In the past, the US release of strategic reserves was mostly based on major emergencies such as wars, financial crises and hurricanes. Only the dumping of reserves at the end of 2000 was due to high winter heating oil prices. At that time, in about half a year, the United States had dumped 29.074 million barrels of reserves, causing the US oil price to drop from a maximum of US$36.95/barrel to US$26.29/barrel (closing price on March 30, 2001), and the price reduction reached 28.8%.
The motivation for the US to release crude oil reserves this time is similar to that in 2000, but the difference is that the Biden administration wants to suppress high domestic gasoline prices through large-scale dumping of reserves (recently, regular gasoline prices in California have risen by more than US$4.68/ Gallons, setting a new record since October 2012).
However, some interviewed experts are not optimistic about this. Han Xiaoping, chief information officer of China Energy.com, analyzed to a reporter from "Daily Economic News" that the current oil price rise and inflation are the main factors that are caused by the over-issuance of currencies in certain countries. At the same time, the tensions between the United States, Venezuela, Iran and other major oil-producing countries have not been eased, the oil production capacity of these countries is difficult to release, and the energy supply situation will not be fundamentally changed.
How much is the delivery volume:
50 million barrels of oil is only enough for the United States to use for 2.8 days
The intensive announcement of the release of oil reserves by many countries this time, how much oil can be allowed to flow to the market? Compared with the crude oil reserves of various countries, is the proportion of this investment high?
A reporter from the "Daily Business News" noted that, in terms of absolute amounts, the amount of reserves currently announced by various countries is indeed not low, and many countries have set records for their reserves.
When the White House announced on November 23, local time that it would release 50 million barrels of crude oil reserves, President Biden stated that "this is the largest release in the history of the US Strategic Petroleum Reserve."
Previously, the largest release of crude oil reserves by the United States occurred in 2011, when 30 million barrels were released to ease the impact of the situation in Libya on the global oil supply. It was also the International Energy Agency (IEA) that announced the release of 60 million barrels of oil reserves. Part of the action.
In Japan, Prime Minister Fumio Kishida announced on November 24 that he would coordinate with the United States and other countries and release part of the national reserves. Prior to this, Japan has repeatedly released private oil reserves, and this will be Japan's first use of national oil reserves.
However, from the perspective of the share of each country's release in the overall reserves, the situation is less optimistic.
According to data released by the US Department of Energy's official website, as of November 19, the total US strategic oil reserve was 604.5 million barrels. In other words, the release of the United States this time only accounts for about 8% of the country's total crude oil reserves.
In Japan, the market is currently expected to release 4.2 million barrels, but the official has not yet disclosed the specific release volume. According to news, Japan plans to sell "several days" of national reserves in order to temporarily increase circulation. From this point of view, its proportion is still low.
More importantly, compared with the oil consumption in the market, the amount of emissions released by various countries can only be regarded as a drop in the bucket. According to data released by the IEA, the U.S. oil consumption in 2020 is 18.1 million barrels per day, and the released reserves of 50 million barrels can only be used for 2.8 days at such a consumption level, and 2020 is the lowest level of oil consumption in the United States in 25 years. .
Zhou Dadi, former director of the Energy Research Institute of the National Development and Reform Commission, told the "Daily Economic News" reporter that the impact of the release of crude oil reserves by major countries on world oil prices may not be obvious. Global oil consumption needs about 5 billion tons a year, and the 50 million barrels of crude oil released by the United States add up to only about 7 million tons.
It is not difficult to find that even if the 5 million barrels of oil released by India and the 1.5 million barrels of oil released by the United Kingdom are included, the total amount released by the United States, India, and the United Kingdom is less than 0.3% of the total global oil consumption.
In fact, the total oil reserves of various developed countries are actually very strong. The data released by the International Energy Agency as of August this year show that, with the exception of Australia, the reserves of other member states all exceed the 90-day import level required by the organization. The UK, which participated in the reserve release this time, has even up to 890 days of imports.
In the context of such strong reserves, why can't the pace of releasing crude oil reserves be greater in various countries?
In this regard, Han Xiaoping analyzed to the "Daily Economic News" reporter that at present, all countries are actually very cautious about releasing reserves, because after the release of reserves, the corresponding amount of oil will still need to be replenished in the future, but the price required for replenishment is unknown. In the final analysis, in the context of energy decarbonization, all countries are reducing investment in the oil field. This general environment may determine that insufficient oil supply will become a long-term problem.
The "Daily China News" reporter also noticed that of the 50 million barrels of oil reserves announced by the United States this time, 32 million barrels of oil, that is, more than 60% of the amount was released through "exchange": purchased Buyers of these strategic oil reserves need to return the same amount of oil to the US government between 2022 and 2024.
How is it different from the previous release and storage background:
Under the green transformation, future oil and gas investment may be insufficient
"Daily Economic News" reporter combed and found that on a global scale, since the establishment of the International Energy Agency (IEA), it has intervened in the market three times by releasing oil reserves.
The first time was during the 1991 Gulf War; the second time was after Hurricane Katrina hit the United States in 2005; and the third time was during the 2011 Libyan war which caused continuous interruption of Libyan oil supply.
What role did the previous release of crude oil reserves play? How has oil prices changed?
During the 1991 Gulf War, the interruption of Iraq’s oil supply had an impact on the global economy. To this end, the IEA launched an emergency plan to put 2.5 million barrels of crude oil reserves on the market every day. OPEC led by Saudi Arabia also rapidly increased production, which prompted the price of crude oil to fall from US$42 per barrel to less than US$20, a drop of about 50%.
In the following ten years, due to ample supply and limited demand growth (Japan’s economy fell into recession, the United States also entered a two-year recession), international oil prices remained basically stable.
In 2005, Hurricane Katrina forced the closure of one-third of the oil fields near the Gulf of Mexico with a total production capacity of 1.5 million barrels per day, affecting the 2.5 million barrels of refinery processing capacity. During this period, gasoline prices jumped by more than 30% within a week of the hurricane’s landfall.
After that, the IEA announced the release of 2 million barrels of crude oil reserves. The impact lasted for about two months. During the period, WTI oil prices fell by about 20%, but then oil prices rebounded in a retaliatory manner until the financial crisis broke out in 2008.
In 2011, after the war in Libya began, crude oil prices began to rise. WTI crude oil futures rose from 84.99 US dollars/barrel in February of that year to 114.83 US dollars/barrel on May 2, an increase of 35.1%.
On June 24 of that year, the IEA stated that 28 member states agreed to release 60 million barrels of crude oil emergency reserves within one month, 2 million barrels per day. In addition, other OPEC members, especially Saudi Arabia, rapidly increased production to supplement the global supply of crude oil, and oil prices quickly fell.
Zou Ji, CEO of the Energy Foundation and President of the China Region, told the "Daily Economic News" reporter that the oil reserve was originally designed to solve the short-term supply shortage, and later it has the function of adjusting oil prices. The release of reserves will play a certain role in solving short-term oil price surges, but it is usually no longer than a few months. From the perspective of medium and long-term trends, oil prices still depend on the overall supply-demand relationship.
The background of the release of crude oil reserves this time is different from the previous three times due to force majeure factors such as wars and natural disasters. According to Zou Ji's analysis, the global increase in oil prices was not due to supply shortages. It was mainly due to excessive quantitative easing policies in the United States and other countries, which caused inflation. The price of oil, which is the most important subject of the US dollar, has of course risen accordingly.
In fact, the United States announced the release of 50 million barrels of crude oil reserves this time mainly to cope with inflation. In order to highlight its effect to the greatest extent, the United States also called on China, Japan, India and other major economies to release crude oil reserves together.
In Zou Ji's view, this move is quite similar to "taking fever-reducing medicine when you have a fever," and is meant to stop inflation from developing in the direction of hyperinflation. "In the short term, such as within a few months, I think it will still have a certain effect, but it is definitely not enough to release the crude oil reserves to pull down the CPI."
"Compared with the previous few times, the general background of this release of reserves is different." Zhu Tong, director of the Energy Economics Office of the Institute of Industrial Economics of the Chinese Academy of Social Sciences, explained to the reporter of "Daily Economic News" that the previous few releases of crude oil reserves , The effect of bargaining may be better, but this time in the context of the energy transition, global oil and gas investment has not grown much in the past five years, and even declined, which will not be conducive to the increase in crude oil production.
Zhu Tong believes that releasing reserves can solve short-term problems, but in the medium and long-term cycle, the increase in oil prices must be used to stimulate investment to "cure the root cause." But now it is difficult for price increases to stimulate investment for the time being, because in the context of the energy transition, each country’s policy is to curb investment in fossil energy, so even the short-term effect of this release may be much worse than the previous few times. "The result is that the market's expectation is: this release will not solve the medium and long-term capacity problems."
Zhu Tong said that the real effect of releasing crude oil reserves depends on how much the economic recovery plays a leading role in the growth of crude oil demand. For the futures market, the impact of the release of reserves is indeed relatively large, because futures have always helped both the rise and the fall, but as long as there are unfavorable factors, such as the supply will not increase significantly, the future oil prices will continue to rise.
But some experts expressed other opinions. An energy industry veteran who declined to be signed told the "Daily Economic News" reporter that crude oil reserves usually play a role in maintaining the stability of oil prices, and most of the time there are imports and exports. However, with the accelerated transformation of the energy structure, the rapid development of electric vehicles, and the commitment of various countries to a carbon-neutral path, the glorious period of oil is coming to an end, and the strategic oil reserves may become "money-losing" things in the future.
How the supply side responds:
Whether OPEC+ will increase production is expected to be released next week
In the past 12 months, the price of WTI crude oil futures has risen by more than 80%. Previously, it once rose above US$85/barrel, setting a new high since October 2014.
The White House has made a lot of efforts to try to reduce oil prices, such as continuously putting pressure on OPEC+ (referring to the Organization of Petroleum Exporting Countries and other major non-OPEC oil producing countries such as Russia) to increase crude oil production. However, OPEC+ ignored it and continued to maintain its existing scale of production increase unchanged, resulting in high oil prices.
So after the release of crude oil reserves, how will OPEC+ respond? Will measures be taken to offset its impact?
According to media reports, the IEA recently accused Saudi Arabia, Russia and other major energy producers of creating "artificial tension" in the global oil and gas market, and urged OPEC+ to accelerate the restoration of supply. However, OPEC+ has repeatedly refused to increase production to curb soaring oil prices. In order to balance the short-term unexpected supply and demand imbalance caused by the release of crude oil reserves, Saudi Arabia is even considering whether to work with Russia to propose OPEC+ to suspend production.
Next week, OPEC+ will meet to discuss production policy. At the most recent meeting held earlier this month, the participants rejected the request for a substantial increase in output from the United States, only increasing the daily output in December by 400,000 barrels.
Zou Ji said that it is still difficult to predict the final reaction of OPEC+. It is also necessary to look at the situation of major oil-producing countries such as Russia and the Middle East, and analyze their economic gains, GDP growth this year, and fiscal revenue. Oil prices, and thinking about making a fortune, are definitely unwilling to actively increase production."
Zou Ji said that OPEC+'s approach is to use production to adjust oil prices. If the basic trust in geopolitical relations still exists, then OPEC+ may be able to reach a cooperation agreement with IEA, and then both parties set a reasonable near-term oil price target, such as It is said that within half a year, it will be controlled at 80 US dollars/barrel and will not rise, and then gradually fall back to the price of 60 US dollars or 70 US dollars. "Of course, this will be a very difficult negotiation, but this agreement may not be impossible to negotiate."
Regarding the trend of oil prices in the market outlook, Zhu Tong believes that the release of crude oil reserves may have a certain impact on prices in the short term, but subsequent price changes still have a lot to do with supply and demand. If supply pressure is not relieved, oil prices will not fall.
Zhu Tong said that from the supply side, if OPEC+ is unwilling to increase production significantly, the release of crude oil reserves can only be a short-term factor; and on the demand side, if the economic recovery is not as good as imagined, and transportation is slowly restored. After that, it is impossible for the oil price to keep rising like this.
Zou Ji analyzed that because the U.S. dollar is over-issued and oil is the most important subject of the U.S. dollar after the collapse of the Bretton Woods system, if this situation does not change, the nominal price of oil will be difficult to come down, and it will take time to digest. In particular, it is necessary to withdraw the over-issued U.S. dollars.
"It's still a drop in the bucket just by releasing crude oil reserves." Zou Ji said, we still have to fight a "combination punch", and we must also look forward to the Fed's policy signals, such as starting to raise interest rates, increase the reserve ratio, and start repurchasing US dollars in the open market business. And so on, these measures will have a greater impact on oil prices.
"I think this process will take more than half a year or even a year at the earliest." Zou Ji said, if boldly predict, within half a year to a year, due to the quantitative easing policy, oil prices may not fall, or may not drop significantly. . In the time period of one to two to three years, the financial nature of oil prices is expected to gradually fade, and it is more dependent on long-term supply and demand to dominate. At that time, oil prices are expected to gradually decline.
Talking about the market outlook, Cheng Ganjiang, deputy director of the Institute of Agricultural Power, China Electric Power Research Institute, and vice president of Beijing Shuimuyuanhua Electric Company, told the "Daily Business News" reporter that from the perspective of futures, every time a commodity exceeds the regular price, it is too high or too low. , Reserve dumping intervention is an early warning of peaking or bottoming, which will have a positive effect after a period of time; but in a short period of time, the price may still move inertially.
How China reacted:
Arrange delivery according to their actual and needs
After the United States announced the release of its strategic oil reserves, Japan, India, South Korea, and the United Kingdom followed suit. How China will respond has also become the focus of global attention.
On November 24, Foreign Ministry spokesperson Zhao Lijian stated that China has noticed that major consumer countries have recently taken actions to release reserves in response to market fluctuations and changes. China is maintaining close communication with relevant parties, including oil consuming and producing countries, and hopes Through communication and collaboration, to ensure the long-term smooth operation of the oil market.
He emphasized that China will arrange to put in the national reserve crude oil according to its own actual conditions and needs, and take other necessary measures to maintain market stability, and publish relevant information in a timely manner.
The reporter noticed that in recent times, my country has been releasing crude oil reserves. On September 24, the first batch of crude oil from the State Reserve began bidding transactions in the National Reserve Petroleum Trading System, and the total sales of the first batch were about 7.38 million barrels.
On November 18, a spokesperson for the State Bureau of Grain and Material Reserves stated that preparations are currently being made for the release of crude oil inventories, and details on the number and date of strategic crude oil inventory auctions will be published on the website in due course.
According to a report by the World Wide Web on November 24, according to the estimates of British consulting firm Energy Aspects, China's current national oil reserves are about 220 million barrels. Based on this calculation, the first batch of crude oil reserves put into the market to "test the waters" in September accounted for about 3.3% of the total reserves.
Zhou Fengqi, executive vice chairman of the China Association for the Promotion of Low-Carbon Economic Development, told the "Daily Economic News" reporter that from the perspective of the whole world, the current oil market is in short supply, and oil prices are rising too high and fast, which is not conducive to economic development. The purpose of oil reserves is to deal with the imbalance of supply and demand and abnormal price increases caused by extreme events.
Zhou Fengqi believes that by selling when oil prices are high and increasing imports when oil prices are low, we can achieve a balance and profit from the process of selling and restocking. In fact, our country has basically continuously increased our reserves in the early stage. As the demand for heating in winter continues to increase, my country will naturally take measures to follow up.
Talking about how the multi-country joint release of crude oil reserves will have an impact on China, Zhou Fengqi said that overall it is good for China. Considering China's strong domestic crude oil demand and over 70% of its dependence on foreign crude oil, excessive oil prices will have a relatively large impact on us. The drop in oil prices will be more conducive to our development.
Zhou Dadi told reporters that China is currently the world’s largest oil importer. Although China has a production capacity of about 200 million tons in 2020, its apparent consumption is close to 700 million tons and it relies heavily on imports. This also reflects my country’s industry. In terms of structure, there is a problem of high energy consumption.
Zhou Dadi believes that my country should strive to achieve two points in the future:
First, try not to increase unreasonable production capacity. For example, do not import a large amount of crude oil and then export a large amount of refined oil, or even export a large amount of petrochemical products.
Second, actively adjust the industrial structure and accelerate the conversion from oil to electricity. At present, 80% of China's oil is used for transportation. If this part is electrified, China's dependence on imported oil will be weakened in the future. In recent years, China has imported an average of more than 240 billion U.S. dollars of oil and gas each year. If the volume of oil imports is reduced, the pressure on import prices will also decrease.
Zhou Dadi said that the release of strategic reserves will not play a key role in suppressing prices, but China should still act according to its own circumstances.
Reporter's Notes丨To deal with oil price shocks, it is necessary to treat both the symptoms and the root cause
"The release of the largest crude oil reserve in history", "The release of the national oil reserve for the first time"...
In the past two days, the market has paid a lot of attention to the joint release of crude oil reserves by multiple countries, and there has been a lot of discussion about the effectiveness of this action.
At present, oil prices in the global market are high, and the release of crude oil reserves can effectively increase market supply. From this perspective, joint action by multiple countries should play a certain role in stabilizing oil prices.
But at the same time, we should also realize that the problem of the current price increase of oil and other commodities is not entirely on the supply side, but is affected by multiple factors such as excessive currency, surge in demand, and insufficient transportation.
Because of this, in order to overcome the current problems, it is not only necessary to release the crude oil reserves as emergency measures, but also to pinpoint the root cause of the problem and prescribe the right medicine to treat the symptoms and the root causes.
