As Oil Prices Rise Due to Ukraine Invasion, US Considers Strategic Oil Release... What’s Next for Global Oil Prices?

Stable trend after Biden mentions strategic oil reserve release
Goldman says "If demand doesn't decrease, it will reach $125"

[Asia Economy Reporter Oh Hyung-gil] As international oil prices soared due to Russia's invasion of Ukraine, attention is focused on whether the United States will take out the card of additional strategic oil reserve releases. However, in a situation compounded by supply chain disruptions, questions arise as to whether the release of reserves can calm the long-term surge in oil prices. Our government is also skeptical, as there is little factor to stabilize prices through reserve releases.

On the 25th, Moon Seung-wook, Minister of Trade, Industry and Energy, expressed his intention to extend the fuel tax reduction measure, which is set to end at the end of April, if necessary, considering the Ukraine situation.

Minister Moon made these remarks during an emergency inquiry at the National Assembly's Industry, Trade, and Energy Venture Committee in response to a question from Hwang Un-ha of the Democratic Party of Korea, asking, "What countermeasures do you have for the short-term surge in crude oil prices?"

Minister Moon said, "Since international oil prices have been maintained at a high level since last year, we are primarily implementing the fuel tax reduction measure. We set the period expecting it to ease after the winter season, but recently, due to this unexpected variable (the Ukraine situation), if necessary, we will extend the period and discuss additional measures within the government."

He also mentioned extending the fuel tax reduction and expanding the application of tariff quotas, explaining, "Currently, except for some items, a 3% tariff is generally applied to crude oil, but we can review with the financial authorities the possibility of lowering cost factors by expanding the application of tariff quotas."

In particular, regarding the plan to release 106 days' worth of reserves in advance to stabilize prices, Minister Moon showed a skeptical response, saying, "There is little factor to lower prices through reserve releases. Also, reserves are held for emergencies in case oil imports become difficult."

On the 24th (local time), when Russia invaded Ukraine, the April West Texas Intermediate (WTI) crude oil futures price on the New York Mercantile Exchange rose more than 9% at one point, surpassing $100 per barrel.

The increase was limited as concerns about supply eased somewhat due to rising crude oil inventories and President Biden's announcement of the possibility of additional strategic reserve releases.

WTI futures closed at $92.81 per barrel, up 71 cents (0.8%) from the previous session. Brent crude April futures also surged to $105.75 at one point during the session but fell below $100 by the close.

According to the U.S. Energy Information Administration (EIA), as of February 18, U.S. commercial crude oil inventories increased by 4.51 million barrels from the previous week to 416.02 million barrels, a much larger increase than the expert forecast of 400,000 barrels.

President Biden stated in a speech that he is cooperating with other countries to release additional strategic reserves worldwide. In November last year, six countries including the U.S., South Korea, and China released strategic reserves to counter rising oil prices.

Our government is stockpiling about 84 million barrels of crude oil in preparation for crisis situations. Including the reserve obligations and operating inventories borne by private oil operators, the total crude oil inventory in South Korea is estimated to reach about 110 million barrels.

Meanwhile, Goldman Sachs forecasted that international oil prices could rise to $125 per barrel as long as demand does not decrease.

This content was produced with the assistance of AI translation services.