US and allies assess release of oil reserves after invasion of Ukraine – sources

WASHINGTON/LONDON, Feb 28 (Reuters) – The United States and its allies are considering a coordinated release of oil reserves amid soaring prices and tight supply following Russia’s invasion of Ukraine , an OPEC+ source and a senior industry source told Reuters.

Oil prices hit their highest since 2014 following the invasion and after Western allies imposed sanctions on Russia, blocking some Russian banks from a global payment system, which is already disrupting oil exports. oil. Some buyers are already avoiding Russian barrels, which are now trading at a steep discount to global benchmarks. Read more

Russia, one of the world’s top oil producers, exports around 4-5 million barrels per day (bpd) of crude and 2-3 million bpd of refined products. China, the European Union, South Korea, India and Japan are its main buyers.

The International Energy Agency (IEA), the Paris-based body that represents most industrialized countries, will hold an extraordinary ministerial meeting on Tuesday, agency chief Fatih Birol said.

The meeting, which will be chaired by US Secretary of Energy Jennifer Granholm, will focus on “the impact of the Russian invasion of Ukraine on oil supply and how IEA members can play a role in stabilizing energy markets,” Birol said in a Twitter post.

Western sanctions on banks included exclusions for Russian energy to avoid overburdening consumers, but the decision to cut off global payments caused some parties to back off from facilitating Russian commodity transactions.

Major buyers of Russian oil have struggled to secure guarantees from Western banks or find ships to bring crude from Russia. Read more

BP has canceled fuel oil shipments from the Russian port of Taman, sources said, as the energy company, the biggest foreign investor in Russia, dumps its stake in Russian oil giant Rosneft. Meanwhile, Britain on Monday ordered its ports to block all vessels flying the Russian flag or connected to Russia. Read more

US President Joe Biden, keen to mitigate high oil prices ahead of congressional elections in the fall, said he wanted to “limit the pain” Americans are feeling at the gas pump.

But he warned that the sanctions could lead to higher prices. White House spokeswoman Jen Psaki said sanctions on Russia’s energy exports were not irrelevant, but could also have “extreme consequences for global energy markets.” , especially ours and that of Europe”.

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Last week, a US government source said talks with the IEA on releasing the reserves were only in the “early stages”.

The senior industry source said the amount of any stock release had yet to be decided.

“US crude will be soft and volume is still under discussion,” the source said. “Europe will mainly release products.”

As the plan is crafted, the Biden administration is keen for OPEC+, a group of major oil producers including Saudi Arabia and Russia, to stick to its agreement to gradually ramp up production as the world is emerging from the pandemic.

That deal was on track ahead of an OPEC+ meeting on March 2 to decide whether to continue with its 400,000 bpd monthly increase in April. Yet no consultation has taken place with Saudi Arabia regarding a release of oil reserves by the United States and its allies, a Gulf source with knowledge of the matter said. Read more

A reserve release would likely lower prices for some time, but it’s unclear for how long.

“This should have a significant psychological effect on oil market sentiment, as it would signal to the market that major oil consuming countries are committed to trying to prevent a further spike in oil prices,” analysts at the firm wrote. energy consultancy FG Energy.

Last November, Washington announced a release of 50 million barrels from the United States’ strategic petroleum reserve, a decision taken in concert with oil-consuming countries including China, India and Japan.

So far, only the United States has released large volumes, with its SPR levels falling to just over 580 million barrels, the lowest since 2002.

Earlier, the Wall Street Journal said the nations were looking at a release of 70 million barrels, while Bloomberg said they weighed a release of around 60 million barrels.

According to officials quoted by the WSJ, members of the IEA could agree on Monday or Tuesday to exploit strategic oil reserves. The IEA declined to comment outside of Birol’s Twitter comment.

Reporting by Susan Heavey and Timothy Gardner in Washington, Alex Lawler and Noah Browning in London and Maha El Dahan in Dubai; Editing by David Gaffen, Jan Harvey, Kirsten Donovan and Marguerita Choy

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