President Trump is reportedly considering tapping the strategic petroleum reserve to lower gasoline prices in an effort to neuter a political threat ahead of key midterm elections in November.
Sources told Bloomberg that options are under consideration by the Trump administration, ranging from a minor 5-million-barrel test sale, a symbolic amount, to a more sizable release of 30 million barrels. A more aggressive option could entail a larger release, combined with coordinated stockpile releases from other countries. No decisions have been made.
“An SPR release would have a psychological impact on the market. It may not translate into lower gasoline prices, but it would immediately bring down crude prices, at least temporarily, until the market adjusts,” Joe McMonigle, senior energy analyst at Hedgeye Risk Management LLC, told Bloomberg.
“It’s unclear whether the U.S. will actually use the emergency inventories, but we can at least tell that they feel a lot of pressure from crude trading above $70,” Ahn Yea Ha, an analyst at Kiwoom Securities Co., said in a Bloomberg interview.
National gasoline prices are hovering just below $3 per gallon, the highest price in more than three years. However, the rally in crude oil prices has stalled and reversed over the past week, with Libya in the process of restoring the 800,000 bpd that had been disrupted. News of Libyan oil trickling back online led to a sharp selloff in crude prices last week.
Monday saw another steep decline in prices, and WTI is back below $70 per barrel. Saudi Arabia said that it would expand its production, offering more volumes to Asian buyers. Russia’s energy minister also said that the OPEC+ coalition could add more than the 1 million barrels per day that they agreed to in June, if needed.
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