Japan to Free 7.3 Mil. Barrels From Oil Reserves Over 30 Days

Sep. 6–TOKYO — Japan will free a total of 7.3 million barrels from oil reserves held by 66 private sector oil firms over 30 days beginning Wednesday in a concerted action by the International Energy Agency to help stabilize the world oil market in the wake of Hurricane Katrina, the government said Tuesday.

Japan will release more than 200,000 barrels a day in the form of either crude oil or petroleum products on the domestic market, Economy, Trade and Industry Minister Shoichi Nakagawa said. It is up to the refiners to decide which products or how much crude oil they will discharge, according to government officials.

The private sector oil firms are currently required to keep minimum oil stockpiles able to meet demand for 70 days, but the Ministry of Economy, Trade and Industry will lower the reserve levels to 67 days to increase supplies to the market, the minister said.

The IEA announced Friday its 26 members will release a total of 2 million barrels from their strategic oil reserves per day for the initial period of 30 days, after the hurricane severely damaged oil production facilities along the U.S. Gulf Coast.

“The concerted action by the IEA, which includes major oil consumers in the world, is very meaningful and can send messages to oil producers and developing countries that are in trouble” because of surging oil prices, Nakagawa said at a press conference.

“Japan made the decision because it should actively and speedily deal with the matter,” he said, adding the country will further promote energy conservation.

At a separate news conference, Chief Cabinet Secretary Hiroyuki Hosoda praised the IEA’s action and said Japan will closely monitor the impact of the oil release on the global market.

Nippon Oil Corp. Chairman Fumiaki Watari, head of the Petroleum Association of Japan, said in a statement that the association will “positively respond to the request for cooperation” over the oil release.

It is the first time for the IEA to tap its members’ reserves since 1991, when it tried to curb soaring oil prices at the time of the Gulf War.

Japan is required to discharge 12.2 percent of the IEA’s total 60 million barrel release over the 30 days. But the amount may change as the Paris-based organization will review the impact of its coordinated action around Sept. 15, METI officials said.

As of June 30, Japan had oil reserves equivalent to 171 days worth of its consumption, comprising the private sector stockpile of 79 days and the state oil stockpile of 91 days, according to METI.

Although the IEA said in a statement that the release of gasoline will be “the most useful contribution,” Japanese oil firms now see declines in the product’s inventory following the summer driving season. Therefore, the government will urge them to reduce imports, the officials said.

The United States has lost 1.5 million barrels per day of oil production and 2 million barrels a day of refining capacity, the IEA said.

Crude oil futures hit a record high above $70 per barrel last Tuesday after the hurricane. The prices have come down somewhat after the IEA’s announcement of releasing reserves. Global crude oil demand is estimated at 84 million barrels per day, according to the IEA.

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