China has made an unprecedented intervention in the global oil market, releasing crude from its strategic reserve for the first time with the explicit aim of lowering prices, Report informs referring to Bloomberg.
The announcement comes amid surging energy costs in China, not just for oil but also for coal and natural gas, and electricity shortages in some provinces that have forced some factories to cut production. Inflation is rapidly rising, too, a political headache for Beijing.
In a late statement on Sept. 9, the National Food and Strategic Reserves Administration said the country had tapped its giant oil reserves to “to ease the pressure of rising raw material prices.” It didn’t offer further details, but people familiar with the matter said the statement referred to millions of barrels the government offered in mid-July.
China, the world’s largest oil importer, has built up a 220-million-barrel reserve of the commodity over the past decade, according to Energy Aspects Ltd.
The statement comes after China’s factory-gate inflation accelerated to a 13-year high and just a month after the White House publicly asked the OPEC oil cartel to pump more crude amid rising gasoline prices in America.
Together, the actions in Beijing and Washington suggest that the world’s two largest energy consumers see $70-$75 a barrel as a red line for the price of oil.