Biden extends oil sales from SPR to November; lowest levels since 1984

Alex Wong/Getty Images News

Crude sales from the U.S. Strategic Petroleum Reserve were only supposed to last through October, after the Biden administration authorized the release of 180M barrels - or 1M barrels per day, over a six-month period - due to inflationary shocks from the war in Ukraine. Now, another 10M barrels of strategic stocks will be put on the market for delivery in November, adding to the recent bout of emergency sales to tame fuel prices. According to AAA, U.S. gasoline pump prices were averaging about $3.67 per gallon on Tuesday, down from a record of over $5.00 seen back in June, though the drop has been accompanied by recession fears, an aggressive Fed and heavy bearish sentiment.

What it means: The latest announcement will bring the total to 165M barrels out of the 180M barrels that Biden authorized in March to "help address the significant market supply disruption and lower energy costs for American families." Volumes in the Strategic Petroleum Reserve have subsequently dropped to just 434M barrels, marking their lowest level since 1984. At the start of the year, the SPR contained 593M barrels, and it reached its highest point in 2010, when emergency stocks reached 727M barrels.

"I think the market should be freaking out" about the end of SPR draws, said Phil Flynn, energy market analyst at the PRICE Futures Group. "I think when the releases end, it's going to have the impact of losing a major producer - it will really tighten supplies." He even believes it could add another $5 to $10 premium to WTI oil prices.

Some history: Washington has released oil from the SPR roughly two dozen times, but most of them have been on a small scale (around 1M barrels) and in the wake of local disasters or emergencies. Over the past year, however, the Biden administration has coordinated two big releases of 30M and 50M barrels, while the latest 180M was a third. Prior to these, a big drawdown from the SPR was a rare event, only coming after supply disruptions during the Libyan civil war in 2011 and Hurricane Katrina in 2005.

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