Oil close to a six-week low

Oil prices slipped to six-week lows on Thursday before regaining some ground. After a Reuters report, China stated it was moving to tap reserves that the United States asked large consuming nations to consider a stockpile release to weaker prices.

The bid by the U.S. to cool markets, requiring China to join a coordinated action for the first time, arrives as inflationary pressures – somewhat driven by rising energy prices – begin to produce a political backlash.

Brent crude was under 20 cents, or 0.2%, to $80.08 a barrel by 1035 GMT, after earlier falling to $79.28, the weakest after Oct. 7.

U.S. West Texas Intermediate crude futures were under 39 cents, or 0.5%, at $77.97 a barrel, having dropped earlier to $77.08, also the weakest since early last month.

Coordinated oil reserve releases correspond with this virtual meeting between Biden and Xi Jinping, stated John Driscoll, managing director at consultancy JTD Energy in Singapore.

The U.S. requires to arrest inflation, and China probably wouldn’t mind seeing a restraint on oil prices.

Prices hit seven-year highs in October as the market concentrated on the swift rebound in demand that has occurred with the lifting of lockdowns to halt the spread of the COVID-19.

Resuming output

The rally was fed in part by the Organization of the Petroleum Exporting Countries (OPEC) and its partners, OPEC+, to resume production slowly.

The International Energy Agency and OPEC have stated in recent weeks that more supply will be ready in the coming months.

But the proposed release of reserves represents an unprecedented challenge to OPEC because it connects the top importer, China.

China’s state reserve bureau stated it was releasing crude oil reserves, although it refused to comment on the U.S. request.

A Japanese industry ministry official stated the United States had asked for Tokyo’s cooperation in dealing with higher oil prices. By law, Japan cannot use reserve releases to reduce costs, the official stated.

A South Korean official established that the United States had asked Seoul to release some oil reserves. It examined the request but added that it could only release crude in case of a supply irregularity.