India on Tuesday announced release of 5 million barrels of crude oil from its strategic petroleum reserves. This means more supply in the market which, in turn, should help cool global crude oil prices.

“This release will happen in parallel and in consultation with other major global energy consumers including the US, People’s Republic of China, Japan and the Republic of Korea,” an Oil Ministry statement said. India is the world’s No 3 oil consumer and importer and has been severely impacted by the relentless rise in international crude prices.

Cut in levies

Earlier this month, the government announced cutting the Road and Infrastructure Cess to bring down the overall Central levies by ₹5 a litre on petrol and and ₹10 on diesel. Following this, many States and Union Territories also cut their Value Added Tax bringing down fuel prices by up to ₹19 a litre.

The Oil Ministry statement said that India believes that the pricing of liquid hydrocarbons should be “reasonable, responsible” and be determined by market forces. “India has repeatedly expressed concern at supply of oil being artificially adjusted below demand levels by producing countries, leading to rising prices and negative attendant consequences,” it added.

This is the first time that India, which stores 5.33 million tonnes or about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast, is releasing stocks for such purposes. The stocks would be sold to Mangalore Refinery and Petrochemicals Ltd and Hindustan Petroleum Corp Ltd, which are connected by pipeline to the strategic reserves.

The US had, last week, made the unusual request to some of the world’s largest oil-consuming nations, including China, India and Japan, to consider releasing crude stockpiles in a coordinated effort to lower global energy prices. This was after members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies rebuffed repeated requests to increase production

OPEC and other producers, including Russia, known collectively as OPEC+, have been adding around 4,00,000 barrels per day to the market on a monthly basis, which many see as not sufficient to cool prices that had been rising with demand returning to pre-pandemic levels.

The threat of a coordinated release, along with new coronavirus-related lockdowns in Europe, has knocked the wind out of crude oil’s rally. Brent crude fell to $78 per barrel this week, from $86.40 a barrel peak hit on October 26.

Prices, however, inched up on reports that OPEC+ could adjust plans to raise oil production if large consuming countries release crude from their reserves.