President Joe Biden’s administration stands ready to release even more barrels of oil from its strategic reserves should the need arise again, according to the U.S. State Department’s senior advisor for global energy security.
“Absolutely. This is a tool that was available to us and will be available again,” Amos Hochstein told CNBC’s Hadley Gamble in Dubai, the United Arab Emirates on Monday.
His comments come as energy analysts assess the effectiveness of a U.S.-led pledge to release millions of barrels of oil from strategic reserves after OPEC+ producers had resisted calls to pump more to help cool the market.
“Remember, this was not a 50-million-barrel release, 30 million barrels were an exchange where companies and traders can take the oil now and return it over a scheduled period of time. That means the Strategic Petroleum Reserve will be replenished,” Hochstein said.
“And therefore, we have more flexibility to be able to do this again in the future if the need arises. I think we wanted to do something that was impactful for the market and that also had the ability and the flexibility to allow us to do that again should the need arise for the American economy.”
In the first such move of its kind, Biden announced on Nov. 23 the coordinated release of oil between the U.S., India, China, Japan, South Korea and the U.K.
Under the plan, the U.S. is to release 50 million barrels from the Strategic Petroleum Reserve. Of that total, 32 million barrels will be an exchange over the next several months, while 18 million barrels will be an acceleration of a previously authorized sale.
OPEC and allied non-OPEC producers, an influential group known as OPEC+, have repeatedly ignored U.S. pressure to increase crude supply to stymie surging fuel prices.
Led by OPEC kingpin Saudi Arabia and non-OPEC leader Russia, the group will meet again on Thursday to discuss the next phase of production policy.
There is little sign the group intends to change tack from their current output plan.
Oil prices whipsaw
Oil prices rose on Monday, following the biggest one-day pullback since April last year late last week.
International benchmark Brent crude futures traded at $74.60 a barrel on Monday, up more than 2.5% for the session, while U.S. West Texas Intermediate futures stood at $70.62, around 3.6% higher.
Several countries announced travel restrictions on Friday on news of the newly identified omicron Covid variant. It prompted some energy market participants to fear a return of travel bans that could weaken fuel demand.
Analysts believe Monday’s rebound in oil prices shows last week’s slump may have been overdone, although it is not yet clear how demand will be affected.
“We are living through a very fragile economic recovery and we needed to address what was an underlying factor that could threaten that recovery,” Hochstein said.
“That’s what we saw in the market last Tuesday with the U.S. moves and, quite frankly, that’s exactly what we also saw on Friday with the oil prices going down quite sharply because we are in this very fragile moment,” he added.
The World Health Organization has recognized the newly identified Covid strain, first referred to as lineage B.1.1.529, as a variant of concern. The WHO said on Monday that omicron poses a “very high” global risk, although a South African doctor has described symptoms identified so far as “extremely mild.”
The U.N. health agency has said it will take weeks to understand how the variant may affect diagnostics, therapeutics and vaccines.
— CNBC’s Pippa Stevens contributed to this report.