China sells oil reserves in unprecedented move to lower prices | Business and Economic News

China conducted an unprecedented intervention in the global oil market on Thursday, selling reserves to lower prices amid soaring energy costs in the country.

China has made an unprecedented intervention in the global oil market, releasing crude oil from its strategic reserves for the first time, with a clear goal of lowering prices.

The announcement came as China’s energy costs soared, not only for oil, but also for coal and natural gas, and power shortages in some provinces forced some factories to cut production. Inflation is also rising rapidly, which is a political problem for Beijing. Oil plummeted.

In a statement late on Thursday, the National Grain and Strategic Reserves Administration stated that the country has used its huge oil reserves to “relieve the pressure of rising raw material prices.” It did not provide more details, but people familiar with the matter said the statement mentioned millions of barrels of crude oil provided by the government in mid-July.

The Chinese Reserve Agency also stated that the “normalization” of the national reserve crude oil rotation is “an important way for reserves to play a balanced market role”, indicating that barrels may continue to be released. The agency stated that putting national reserve crude oil on the market through public auctions “will better stabilize domestic market supply and demand.”

No one called the Press Office of the State Council of China and the National Development and Reform Commission for comments outside normal working hours.

China is the world’s largest oil importer and has built huge oil reserves in the past decade. This buffer zone is different from the strategic oil reserves held by the United States and Europe, or SPR, which is mostly used only during supply disruptions and wars. However, China has expressed its willingness to use its reserves to try to influence the market.

“On the surface, this is a very clear statement that it intends to use SPR to curb oil prices at domestic refineries,” said Bob McNally, a former senior White House policy adviser who now runs Rapidan Energy, a consulting firm in Washington. Group.

The statement was issued after China’s factory-door inflation accelerated to a 13-year high, and just a month ago, the White House publicly asked the OPEC oil cartel to increase crude oil supply in the face of rising gasoline prices in the United States. The actions of Beijing and Washington show that the two largest energy consumers in the world regard US$70-75 per barrel as the red line of oil prices. Hurricane Ida also eliminated a large amount of crude oil production in the United States and affected the supply of China Unipec.

Brent crude oil fell by US$1.36 to US$71.24 per barrel in London, erasing earlier gains. West Texas Intermediate also experienced a similar reversal.

China has been selling other commodities in its strategic reserves, including copper, aluminum and grains. In the past, Beijing rarely confirmed the announcements, which often penetrated the market through the conversations of traders. Many people believe that the public release is to maximize the impact of this move.

The statement on Thursday first stated that the release was carried out “with the approval of the State Council,” and Chinese researchers believed that this was a statement directed by China’s most senior political leader.

(Updated the context of the White House comment in paragraph 6.)