India to release 5 mn barrels of oil from reserves to cool prices

Tribune News Service

New Delhi, November 23

India will release five million barrels of its strategic petroleum reserves (SPR) in conjunction with other major economies led by the US to cool international oil prices.

India currently has a capacity to store 38 million barrels of crude at three underground locations in Mangalore, Visakhapatnam and Padur (Udupi). The first release may happen in a matter of days with dates being worked out with other countries.

The impact of the coordinated announcement from world capitals was immediate. Brent crude fell to $78 from $86.4 per barrel, but recovered slightly on reports that “OPEC +” could cut down production.

China, Japan, South Korea and the UK also announced releases or were preparing to do so. But they were comfortably topped by the US, which will release 50 million barrels of oil from its SPR of which 32 million is a new announcement and 18 million barrels were authorised by the US Congress after oil prices had hit a 32-month high.

The US had opened diplomatic negotiations after OPEC+ (including Russia) added just 4 lakh barrels per day, which was seen as inadequate. They then rebuffed US President Joe Biden’s call at the G-20 summit late last month to add more crude to the market to further cool prices.

Coupled with high inflation, high pump prices were affecting the Democrat’s electoral prospects in the next round of Parliamentary elections next year. In India, after the BJP’s poor showing in bypolls, the Centre immediately reduced taxes on petrol and diesel with the states quickly following suit.

India first sold its SPR to its own refiners in August when international prices were high, following the path taken recently by China.

Accusing the major oil producing countries of cartelisation, an official statement said, “India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces.”

The stocks will be sold to Mangalore Refinery and Petrochemicals and Hindustan Petroleum Corporation, which are connected to the SPRs by pipelines.

Move in tandem with other major economies

• The release will happen in parallel with the US, China, Japan and South Korea
• Immediate impact on world crude market, but OPEC+ hints at retaliation
• The US will release 50 mn barrels of oil from its SPR of which 32 mn is new announcement