U.S., allies weigh oil reserves release following Russia’s invasion of Ukraine – sources

WASHINGTON/LONDON, Feb 28 (Reuters) – The United States and its allies are weighing an oil reserve release amid soaring prices and concern about supplies after Russia invaded Ukraine, an OPEC+ source and a senior industry source told Reuters.

Oil prices have hit their highest since 2014 following the invasion and after Western allies have imposed sanctions on Russia, blocking some Russian banks from a global payments system, which could cause disruption to its oil exports. Some buyers have already been shunning Russian barrels, which are now trading at a heavy discount to world benchmarks.

The International Energy Agency (IEA), the Paris-based body which represents mostly industrialized nations, will hold an extraordinary ministerial meeting on Tuesday, the agency’s head Fatih Birol said.

The meeting, to be chaired by U.S. Energy Secretary Jennifer Granholm, will concern “the impact of Russia’s invasion of Ukraine on oil supply and how IEA members can play a role in stabilizing energy markets,” Birol said in a Twitter post.

Last week a U.S. government source said talks with IEA on a release were in the “early stages.”

The senior industry source said the amounts of any stocks release were not yet decided.

“The U.S. crude will be sweet and the volume is still under discussion,” the source said. “Europe will mainly release products.”

The Biden administration is struggling to lower oil prices ahead of elections in the autumn. Last November, Washington announced it would release 50 million barrels from the U.S. Strategic Petroleum Reserve, a move made in concert with oil consuming nations 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, their lowest since 2002.

Western sanctions on banks have so far had carve outs for Russian energy, to avoid burdening consumers.

But analysts have warned that one unintended effect of sanctions could be that some parties forgo facilitating transactions on Russian commodities. Top buyers of Russian oil have struggled to secure guarantees at Western banks or find ships to take crude from one of the world’s largest producers. read more

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

A reserve release would likely lower prices for a time, but it is unclear how long that would last.

“It should have a significant psychological effect on oil market sentiment, because it would signal to the market that the main oil-consuming nations are determined to try to prevent a further spike in oil prices,” wrote analysts at energy consultancy FG Energy.

Earlier, the Wall Street Journal said the nations were considering a release of 70 million barrels, while Bloomberg reported they were weighing a release of about 60 million barrels.

According to officials cited by the WSJ, members of the IEA could agree as early as Monday or Tuesday to tap their national strategic oil reserves. The IEA declined to comment aside from Birol’s comment on Twitter.

Reporting by Susan Heavey, Alex Lawler and Noah Browning and Timothy Gardner; Editing by Jan Harvey, Kirsten Donovan and Marguerita Choy

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