The U.S.-led initiative to release strategic oil reserve in an attempt to curb rising oil prices, joined by South Korea, China, Japan, India, and the U.K., was encountered by the opposition from major oil producing countries including Saudi Arabia and Russia, signaling a move to phase out oil production. As global oil price keeps rallying despite the plan to release strategic oil reserves and major oil producers stage a counterattack, concerns are growing over a possible oil price spike.
The Wall Street Journal cited an anonymous source and reported that Saudi Arabia and Russia, the two largest oil producers, are weighing a shift in oil policy by cutting down oil production in a response to the U.S.-led plan to release strategic oil reserve in an effort to reduce oil prices. The newspaper further reported that OPEC, led by Saudi Arabia, and OPEC+, consisting of OPEC members and non-oil producing countries led by Russia, will hold a meeting early next week to review a long-term plan for increasing oil production that was initially devised earlier this year. OPEC+ had previously agreed on increasing oil production by 400,000 barrels per day since August.
OPEC+ considerably decreased oil production last year when the world was hit by COVID-19, which led to a decrease in oil consumption and falling oil prices. Oil prices began to rise again with signs of economic recovery, and the Biden administration announced on Tuesday that it decided to release 50 million barrels of the U.S. strategic oil reserve. However, critics point out that the release is insufficient to prevent oil prices from escalating. Approximately 70 million barrels are to be released by six countries joining the U.S.-led initiative, which accounts for a little more than the half of the global daily oil consumption. Experts raised voices of concern about the release of oil reserve that such move may provoke oil producing countries and backfire, leading to a reduction in oil production. This concern, unfortunately, appears to be materializing.