Did the SPR crude release backfire? Oil heads back to $80

gong hangxu/E+ via Getty Images

• WTI crude (CL1:COM) rose more than 4% over the last 24 hours to retake $79/bbl after the Biden administration announced plans to release 50M barrels of oil from the U.S. Strategic Reserve, along with China, Japan, India, South Korea and the U.K. While the move was meant to lower prices, the volumes announced were much less than the market was expecting and would need to be sustained over a longer period of time. Many of the barrels will also need to be returned by the refiners who buy them, leaving traders forecasting tighter balances.
• Quote: "I told you before that we're going to take action on these problems. That's exactly what we're doing," President Biden said from the White House. "It will take time, but, before long, you should see the price of gas drop where you fill up your tank, and in the longer term, we will reduce our reliance on oil as we shift to clean energy." U.S. crude supply rose 2.3M barrels last week - API.
• A large portion of the barrels is also set to be exported to China and India. That's because the supplies will comprise of sour crude, a type of oil that many American refiners are avoiding due to its high sulfur content, which makes it more expensive to process. Foreign buyers are also attracted to the oil since it's cheaper than the global Brent benchmark.
• Go deeper: Following the decision, some are even referring to the U.S. emergency stockpile as the Strategic Political Reserve, with the president under pressure to tamp down inflation. Meanwhile, OPEC+ is scheduled to meet in a few weeks and could unveil a counterpunch if the group feels threatened. The cartel would need to give up two months of output increases to offset the 50M barrel release, after snubbing several requests from the U.S. to pump more oil. The national average price for a gallon of gas was $3.40 on Tuesday, according to AAA, more than a $1 increase from a year ago. Bank of America warns of $120 oil in 2022.
• ETFs: USO, UCO, BNO, SCO, USOI, USL, DBO, NRGU, UGA, OILK, NRGD, OLEM, USAI, NRGO, NRGZ, YGRN, UGA

Comments

[dennis rfm]

Who will get this oil they are releasing and what will they pay for it. If they sell it below market price to the big oil refiners then people will be upset because they will be helping the polluters. If they sell it overseas it will defeat the purpose of having it here so if we get into trouble on oil supplies then what good is having the reserve.

[Sir V-i-val]

@dennis rfm US refiners are not interested in sour crude....the sour crude will be sold to China and Asia at a very hefty discount probably 5 dollars a barrel on Mars crude that trades at a very hefty discount to WTI

[blain]

My guess to subsidize EV's will be to add federal taxes on everyone's electric bill.
Those EV have to be charged from some kind of power generation.
That way, even if you don't charge EV's, you can support your neighbor across town.

[Steve R.]

@blain Based on left wing economics, taxing everyone via the electric bill will be the way-to-go to force everyone to buy EV vehicles. The better way to go, would be through a consumption tax based on miles driven. Tax each EV vehicles annually at the time of registration renewal.

[blain]

@Steve R. Yes, taxing only the EV owners would be fair.
But the more collective angle would be forcing everyone to bear the burden for the benefit of the few.
Is there anything that can snap people out of the current socialist trance or will time and the pendulum swing eventually do that?

[Frederick Taubert]

The Reserve is only for a supply cuts, not for Price control! That is the only purpose, not for politics!

since at least 50% of the price gasoline is local, state and federal taxes then cut some of those! Electric vehicles are Subsidized by the tax payers and then pay no State or Federal taxes.

Trump filled it at low low prices!
The last time this was done it was Clinton and it got funneled through his big donors at nice prices!

[Lanidracl]

SPR = Strategic Petrol Reserve

[Steve R.]

Rubbish. Pointless political theater by Biden for the clueless gullible. The article is also disappointing as in the "Go deeper:" section no mention is made that the US could increase oil and gas production. It's almost as if the article was buying into despicable Biden's lies and not exposing them.

[Mokajoka]

WTI now under $70. Sometimes people should keep their hateful comments to themselves. Just look below and shake your head

[flumeride]

@Mokajoka Give it time. The SPR release was less than 3 days supply. The reason oil is down today is because of latest covid variant.

Old and slow Joe stopped flights from South Africa like Trump stopped flights from Wuhan. Trump was called xenophobic by the mayor of New York, the governor of NewYork and the cerebral Joe Biden. Nobody is calling Cerebral Joe a racist.

If you want to get into hateful comments all you have to do is look at the daily comments pointed at Trump for 4 years.

The cost of oil is like any commodity: supply and demand. Biden has made several decisions to reduce global supply. Then he urges OPEC+ to increase production when the U.S. was meeting production needs prior to his administration taking office. Those are facts, not rumors and not hateful comments.

Many countries are considering lockdowns, shelter in place mandates along with vaccine mandates and mask mandates. This will reduce travel, including driving cars. That is why oil prices dropped today.

[Steve R.]

@flumeride The political left has to keep Covid "alive" to spread fear to justify their political actions to repress the public and keep themselves in power.

[dl4]

@Steve R. why is no media time given to therapeutics? Vax and mandates. Why does a pro Vax State with NO mandates have the lowest rate per of Covid in America! Numbers don’t lie, liars refuse to do nothing but twist the numbers in their favor.
The answer is Florida! They have an emphasis on treatment with 23 Center of Excellence for therapeutics. Biden tried to limit their use of the antibody treatment because he knows they are correct. Why has Sweden got incredibly low number? We have ~75% with vaccination and a huge numbers of past infected, what happened to herd immunity. They have no clue what is going on and are making bad policy by ignoring the numbers!

[MathMan1959]

Obviously no one in the WH understands the energy business nor Econ 101.

[Sir V-i-val]

Our communist leader Biden is hoping to depress Mars prises enough because he wants China to be able to buy cheap US oil....traders said they expected the sale of SPR oil, which is mainly blended sour, or high-sulphur, crude, will depress the value of U.S. sour crude grades, such as Mars and Southern Green Canyon, and benefit buyers in Asia, which processes mainly high-sulphur oil.

In the first auction of the coordinated release, about 10 million barrels will be made available from Big Hill and Bryan Mound in Texas, about 7 million barrels from West Hackberry in Louisiana and another 5 million barrels from Bayou Choctaw in Louisiana, the DOE said on its website.

Deliveries will take place January through April 2022, with early deliveries accepted in late December, it added.

Buyers will have to return the oil at later dates between 2022 and 2024, the DOE said.

Companies are required to submit bids on Dec. 6 and contracts will be awarded no later than Dec. 14.

One trader speaking on condition of anonymity said, spread over four months, the release equated to a steady 270,000 barrels per day stream of medium sour grades providing direct competition to Mars.

The quality of crude to be released will have API gravity of 31 to 33 degrees, the trader said, adding it was "very good news" for Asian buyers of Mars.

The grade, already valued at around minus $3.50 per barrel versus WTI on Wednesday, is expected to weaken further.

South Korea is a leading buyer of Mars crude in Asia while China has purchased the grade whenever the arbitrage window is open.....www.marketscreener.com/...

[Winnertakesall]

Its heading to $130-150.

[RickcarinoNYC]

Many many are madly against Biden and all goods things happening are ignored and all bad things are blamed on him.
Biden already compromised on Fed chairman, infrastructure plan, no dreamers legalized yet, oil drill permits are back as per court order. No social agendas are pushed forward. Jobless claims is lowest since 1969. Fourth wave of Corona Virus is likely prevented. Most of all, S&P and Nasdaq are 25% up for 2021, DOW up 17%
So not bad, we are born with Likes and Dislikes,
We grow older with it. But we learn to live with it with smile. Happy Thanksgiving.

[imdaman]

@RickcarinoNYC Hey Rick,
Were you one of the rioters last summer in NYC too?
Boy you sure can put lipstick on a pig!

[StevesWin]

@RickcarinoNYC you obviously didn't read the "fine" print of the package & you want to get an endorphin rush on how Great thou art

[jimoc]

@RickcarinoNYC, borders have a welcome mat, can you explain that one while your explaining. Oh and the dead Marines too.
Hey how did you like how he read his last speech? Weekend at Bernies?

[cfgh]

Oil was released from the SPR, and on the other side of the earth a butterfly flapped it’s wings. Both had no effect on gas prices.

[MathMan1959]

@cfgh

And most of the oil “released” will be in 2022. Therefore, no effect on gas prices until then (if at all).

[Brock Ekstein]

I am not so convinced that reducing carbon is a good thing. Without naturally occurring carbon releases the Earth would become too cold to sustain life. Each "climate scientist" should be made to disclose who is funding their research. Find out where the $ is coming from & then read the results of their funding. Without this information, we should use a grain of salt.

[Tom850870]

@Sash777 Uh, you need a little research yourself. We don't "need" man-made carbon emissions.

CO2 makes up only 412 parts per million of the air (2020). That's up 47% since the start of the industrial age, and methane 250%. In overall terms, very small amounts, but the evidence of correlation with rising temperatures is overwhelming. Correlation is not causation, but that case has been abundantly made as well.

[StevesWin]

@Tom850870 go ahead tell us which electric car you bought?
You still need to burn something to trim the power station but you know already.
Gw'ing is all about taking US money & sending it overseas

[Tom850870]

@StevesWin I drive a Nissan truck, and burn plenty of gas in it. So? Did I say I was a woke greenie? I may not be a leftist extremist, and there are plenty of them, but I'm not a right wing anti-vax climate change denier nut either. They're just as bad, the flat earth society.

In any case, the point was, the amount of CO2 in the atmosphere before the industrial revolution was minuscule, and nature managed to get along apparently. The poster's point was that we needed carbon emissions, which is ridiculous.

[Hank890]

Another example of ignorant nonsense, heavy on ideology, light on the common sense of industrial reality, designed to fool and manipulate unfortunate low-skill voters with little education and often worse prospects.

This yammering Administration thinks that spin, PR, optics, endless TV speeches, political theatre, licking EU backsides, ignoring military threats, matters more to the American people than genuine economic laws, engineering reality, trade deficits, lagging productivity growth, real rising inflation, lagging productivity growth, plaguing our future after the C-19 bounce-back.

We must stop ignoring logical and scientific fallacies of a deeply partisan agenda, wrapped in long obsolete political pipe dreams of the New Deal era, open immigration, stereotyped class-hatreds, and undefined shallow slogans (Go BIG, fair-share, transitory, transitional (to what exactly??) , etc.) left-over platitudes and emotional barbs from 50 years ago---when Joe was still a young man and the internet was unknown.

A return to the simplistic slogans of the FDR new dealing and an end to prohibition, certainly not what America needs in 2022.

America needs renewed industrial and intellectual productivity growth. This will not come from a million more diaper-changers on FEDERAL and state payrolls.

America needs streamlined and secure supply chains for nearly all source materials, mined, pumped, harvested, patented, and financed. This will not come from shutting down US petroleum production in favor of importing more oil from the Saudis, the Russians, and the Iranians.

Yes, the climate is changing more rapidly than in the 20th century. Yes this fact is a threat to every society on Earth. But human efforts to decarbonize effluents will likely not stop or reverse climate stress in less than a century at best.

And if history can be believed, the climate evolution may remain on its current course for a millennia or more, even if anthropogenic sources of carbon are eliminated.

The focus of national polices for the next 20-30 years should elevate priority to mitigation of the inevitable negative impacts of accelerating climate change, such as rising ocean levels, endangered agricultural and ocean productivity, and increasing threats from infectious diseases. Population growth is certainly one part of this problem.

The contribution of carbon effluents to the problem cannot be ignored, of course, but society must be realistic about the how much this 1980s era focus can change the future prospects for humanity in the next 100-200 years.

The one hope for decarbonization to gain substantive traction faster as a solution is filtering the existing build-up in the atmosphere itself, economically and efficiently. Political traction is NOT substantive. It is theatre.

Transitional change is an inexpensive slogan, a code word,......but for what,...EXACTLY?

Make Joe spell out for us exactly, in detail, what he plans to transform so that America will become his kind of country.

-Ethnicity and gender quotas (for private and state employment and college entrance), de facto or otherwise?
-Politicized independent agencies? (like the FTC, FEC, SEC, FED, etc.)
-Confiscatory tax regimes? (since when is earning money a criminal act?)
-Police state surveillance of political opponents? (thanks, Susan Rice)
Stacking the judiciary?
-Trafficking political activists across jurisdictional boundaries for short term residence to skew close elections? (especially during certain special elections)
-Defunded local police?
-Social justice and critical race theory taught via national curriculums to all students in every state and county, from Kindergarten up, by politically certified teachers?
-Open borders for semi-literate, non-English speakers, economic migration?
-A repudiation of Constitutionally guaranteed and centuries-tested free market principals?
-A new definition of anti-trust to include firms that are too successful or too large, even if there is no demonstrable consumer damage? (an EU definition)
-A supply of gasoline so deeply constrained by hostile and unnecessary regulation that most Americans will not be able to afford to operate their cars? (and most Americans cannot afford to buy ultra-pricy EVs---even the cheapest ones)

[knownothingguru]

@Hank890 You have nailed it, sir. I haven’t seen a better summation of our current condition, thanks to the pathetic decisions coming out of Washington DC. The mid-term elections, coming in less than eleven months, will be a proxy by the American people of who they want leading the country. Let’s Go Brandon!

[Tntowldct]

We just had another doozy of an inventory report. 8 million barrels of total inventory (including the SPR) were drawn out this week. That takes the 3 week running total to about 30 million barrels, or 1.5 million barrels/day in deficit.

Also, this report doesn't take into account the crazy amount of gas that's about to be burned this week. Wait until next week's report.

[StevesWin]

@Tntowldct your excited aren't you, lol

[mosky moc]

not at all. xiden the pant shitter got his headlines from the main propaganda outlets

[marcoyolo]

Leftist thinking in nutshell. We’ll just flood the market with cheap or free things, that will make demand go down!

[veebee13]

Climate Change taking a backseat between criminal OPEC and dumbo Biden, Greta gonna be mad!!! lolol

[eddy6]

This was never going to work. It was just a forced political display. Geez, just pay the increase, or stop driving so much; or actually get a good job. There is a shortage of tanker truck drivers. You are not going to die--even if gas goes to $4.00. Try cutting the taxes on gasoline. That's a middle-class tax cut. We don't need another pipeline from Canada to solve the problem. Business entities, like UPS or UBER and Amazon could negotiate volume prices for their drivers, with gas stations. What is this? The United States of wusses and crybabies?

[marcoyolo]

@eddy6 let them eat cake - Democrats

[Hank890]

@eddy6

The SPR drawdown is just another example of Meaningless Rubbish.

[StevesWin]

@eddy6 I like you write, we do indeed need the pipeline, high gas prices "usually" causes a recession - I read it a long time ago...

[Demba59]

Finally, after reading through the tripe written by so many commentators on this site who are so politically blinded that they can’t see straight, there’s finally a COMMON SENSE (caps intended) comment written by Johnny Skyhook ( whoever you are). “Assuming” that the rest of you are adults, how about behaving as such and cutting out the childish political barbs and writing comments about the subject from a commercial point of view that might have some introspective and interest to the rest of us? After all, isn’t this supposed to be what this site is meant for?

[TomKL]

It seems that this release of oil from the SPR will have more of a stabilizing effect on oil prices. Small oil storage builds and drops seem to cause outsized falls and rises in near term oil prices as oil traders micro-analyze oil supply. As gasoline consumers see the current prices, their driving may be cut back and prices will fall naturally without government attempts to manipulate oil prices.

[Hank890]

@TomKL

Not very realistic.