India Cedes to US' Demand, Will Release 5 Mln Barrels of Crude From 'Strategic Reserves'

Like India, South Korea and Japan have also relented to Washington's demand to release their respective strategic crude reserves to help ease global crude prices. Japan is reportedly taking the step despite a domestic law prohibiting it from doing so.

India will release about 5 million barrels of crude oil from its emergency stocks in tandem with other major economies to cool prices, the government said in a statement on Tuesday.

"This release will happen in parallel and in consultation with other major global energy consumers including the USA, People’s Republic of China, Japan and the Republic of Korea," said the statement by the federal ministry of petroleum and natural gas.

The US, on its part, has also agreed to release 50 million barrels of crude from its strategic reserves, as per reports on Tuesday.

The reversal in New Delhi’s stance comes amid Joe Biden’s calls to major oil-consuming countries, including China, India, Japan, and South Korea, to release their stored crude reserves in order to stem rising crude prices.

Just last week, India’s Federal Minister for Petroleum and Natural Gas Hardeep Singh Puri rebuffed Washington's request to tap into the South Asian nation’s crude stockpiles.

"Strategic oil reserves weren’t ever intended for a situation like this. It’s for a force majeure situation, if there’s an earthquake, a global outbreak of hostilities, and oil supplies are shut,” Puri told Bloomberg TV.

According to the Indian government, the strategic petroleum reserves are located at three locations – Vishakapatnam, Mangalore, and Padur. India has stockpiled crude reserves of 38 million tonnes, as per officials.

The Indian government claims that it “took advantage” of low crude prices in April and May last year to fill up these reserves, and New Delhi saved $671 million in procuring the crude at a cheaper rate. The crude to fill up these reserves was sourced from Saudi Arabia and the United Arab Emirates (UAE).

Rising Domestic Pressure on Biden

Domestically, the Biden administration has been facing pressure over rising crude costs, which come on the back of soaring demand in major economies as they open up after COVID-induced slowdowns last year.

Last month, the crude futures at the West Texas International (WTI) rose to a seven-year high of $84.24 a barrel.

US Energy Secretary Jennifer Granholm said this month that Biden was “all over this” and “was very concerned,” when asked what the administration was doing to bring down crude prices.

Energy Secretary Jennifer Granholm laughs when asked about Biden's plans to bring gas prices down.

"Ha ha ha. That is hilarious!" pic.twitter.com/0V0XCsVqDc

— RNC Research (@RNCResearch) November 5, 2021

The US (as well as India) blames the Organisation of Petroleum Exporting Countries (OPEC), the 13-nation bloc led by the world's largest crude producer Saudi Arabia, for not producing enough oil to meet global energy demands.

According to the International Energy Agency (IEA), the OPEC Plus nations (23 countries, including Russia) raised their average crude share by 217,000 barrels per day (bpd) to 27.45 million bpd in October. However, they still fell short of the target to raise their collective output by 400,000 bpd.

OPEC Plus nations agreed in July that they would raise their collective output by 400,000 bpd.