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Washington Has Trouble Refilling The SPR After 220 Million Barrel Draw

January 10, 2023

Washington Has Trouble Refilling The SPR After 220 Million Barrel Draw

  • The DoE has received several offers for February purchases to refill the SPR.
  • For February, the plan was to purchase 3 million barrels, ideally when oil dropped to around $70 per barrel.
  • The rejected bids are prompting speculation that refilling the SPR will be challenging, at best.

After drawing over 221 million barrels of oil from the Strategic Petroleum Reserve (SPR) in 2022, Washington is having a tough time refilling it in the New Year, with the Department of Energy (DoE) rejecting the first offers on the grounds that they failed to benefit taxpayers.

The DoE has by now received several offers for February purchases to refill the SPR, according to both Bloomberg and Reuters. However, those offers have been rejected as too expensive or failing to meet other requirements.

For February, the plan was to purchase 3 million barrels, ideally when oil dropped to around $70 per barrel. This 3-million-barrel pilot program would have given sellers a fixed price for future deliveries and is in contrast to the DoE’s normal operating procedure, which had seen it purchase oil for faster delivery without fixed-price contracts.

Right now, WTI is trading around $75/$76 per barrel, and new data from the Energy Information Administration (EIA) released on Monday shows another 0.8 million barrel draw from the SPR.

According to Bloomberg, citing unnamed sources “familiar with the matter”, the DoE will now postpone its originally planned February purchases and embark on a new approach for fixed-price offers.

“DOE will only select bids that meet the required crude specifications and that are at a price that is a good deal for taxpayers,” the DoE said in a Friday statement carried by news agencies. “Following review of the initial submission, DOE will not be making any award selections for the February delivery window.”

…click on the above link to read the rest…

OPEC+ Reportedly Threatening Response To Global Coordinated SPR Release

November 22, 2021

OPEC+ Reportedly Threatening Response To Global Coordinated SPR Release

In an apparent ‘threat’ response to headlines suggesting the Biden administration is attempting to coordinate a global SPR release to push down oil prices (and following reports from Japanese media that the government is preparing to release crude from its strategic stockpiles), the Riyadh-based International Energy Forum said OPEC+ may change its plan for raising oil output if consuming nations sell petroleum reserves or the coronavirus pandemic worsens.

“I anticipate OPEC+ energy ministers will maintain their current plan of adding more supplies to the market gradually,” IEF Secretary-General Joseph McMonigle said in a statement Monday after a meeting with a Japanese foreign ministry official about recent volatility in energy markets.

“However, certain unforeseen external factors such as a release of strategic reserves or new lockdowns in Europe may prompt a reassessment of market conditions.”

Critically, this confirms much of what we have written about how any coordinated SPR release (however unlikely that is in and of itself) that any increase in supply will be met by action from OPEC+ moving to not hike outputs as previously planned – thus perhaps helping prices in the short-term, but raising them longer-term.

For now, oil traders are undecided at what this news means…

For now we expect gas prices to drop in the short-term as the lag in the supply-chain from crude to the pump implies some built-in reduction…

But, if OPEC+’s threat response plays out with higher prices, those lower gas prices will prove ‘transitory’.

…click on the above link to read the rest of the article…

White House Debates Immediate, ‘Radical’ Action To Lower US Energy Prices

November 12, 2021

White House Debates Immediate, ‘Radical’ Action To Lower US Energy Prices

The Biden administration is actively debating whether to immediately intervene to lower US energy prices, rather than letting markets ride and hope they settle, as the ‘most popular president in history’ grapples with soaring inflation amid trade and foreign policy matters, according to Bloomberg.

A pipeline carries oil at the US strategic petroleum reserve facility known as Big Hill near Beaumont, TX

While White House aides have reportedly been lobbying to release the nation’s Strategic Petroleum reserve – or even halting oil exports, several Energy Department officials have pushed back.

For several weeks, a small group of top Biden aides has discussed measures to bring down the cost of gasoline, according to people familiar with the matter. Consensus has so far been elusive, with some Energy Department officials pushing back against tapping the Strategic Petroleum Reserve while White House aides lobby for a release, or the even more radical step of halting oil exports, the people said.

With gasoline at a seven-year high and the US consumer price index hitting a multi-decade high this week, the Biden administration is stuck between trying to boost fuel production to bring down costs, while showing the world how ‘green’ his administration is while the UN climate conference in Glasgow winds down.

“It’s decision time for the Biden administration,” according to Bob McNally, president of consultant Rapidan Energy Group and a former White House official under President George W. Bush.

Those running the show include White House Chief of Staff ‘President’ Ron Klain, National Security Advisor Jake Sullivan, head of the National Economic Council Brian Deese, Energy Secretary Jennifer Granholm and her deputy, David Turk, and finally, energy expert Amos Hochstein who was hired earlier this year to work at the State Department.

…click on the above link to read the rest of the article…

Trump May Tap Up To 30MM Barrels From Oil Reserve To Halt Rising Gas Price

July 13, 2018

Trump May Tap Up To 30MM Barrels From Oil Reserve To Halt Rising Gas Price

Having already yelled at OPEC on several prior occasions on Twitter with demands for Saudi Arabia and the rest of the OPEC cartel to boost production in order to push oil – and gasoline – prices lower…

… only to realize that the amount of needed incremental output is next to impossible to achieve when considering the amount of Iran exports that will be curbed on November 4 when the Iran sanctions kick in officially, Trump has been left with two choice: ease off the Iran sanctions and implement them more gradually, or release oil from the US Strategic Petroleum Reserve.

And now, with oil prices continuing to rise and pushing the price of gasoline to levels not seen in 4 years, at a critical time with November mid-term elections fast approaching, Trump appears to have decided on the latter, and is actively considering tapping into the nation’s emergency crude oil reserve, Bloomberg reported citing two people “familiar with the situation.”

While no decision has been made yet to release crude from the 660-million-barrel SPR stockade, options under review range from a 5-million-barrel test sale to a larger release of 30 million barrels. An even larger release could be possible it it were to be coordinated with other nations.

For Trump, the magic number appears to be $3 per gallon on the national level; every time regular gasoline nears that round number, Trump has been quick to voice his displeasure.

“Oil prices are too high, OPEC is at it again. Not good!” he said on Twitter last month. On the Fourth of July, Trump tweeted: “The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!”

…click on the above link to read the rest of the article…

Satellite Imagery Reveals China’s Strategic Petroleum Reserve Is Vastly Greater Than Disclosed

October 1, 2016

Satellite Imagery Reveals China’s Strategic Petroleum Reserve Is Vastly Greater Than Disclosed

At the end of August, we did a follow up article on what we believe is a far bigger marginal driver to the price of oil than OPEC production (which may or may not be reduced by up to 750kbpd in November), namely the Strategic Petroleum Reserve of China, a major importer of oil in recent years, along with India, taking advantage of low prices and largely supporting global oil demand growth at a time of rampant oversupply, and which we profiled most recently in “A Chinese “Mystery” Has Become The Biggest Wildcard For The Price Of Oil.”

The simplest reason why Chiina’s SPR capacity (and storage) is of key importance, is that it determines the ongoing demand China has for oil – of which much ends up in storage –  and also allows analysts to calculate how much more oil China would need, in order to fill up its SPR. While China has traditionally kept any data about its SPR inventory as opaque as possible, in a rare release this month, Beijing reported adding about 43 million barrels of crude to its strategic reserves between mid-2015 and early this year. Reserves totaled 31.97 million tons in early 2016, equivalent to about 234 million barrels, the National Bureau of Statistics said in a statement that was the first government update on reserves since December.

 


A guard stands before the oil SPR tanks at Zhoushan

As Bloomberg confirmed, emergency stockpiles of the second-biggest oil user have been a source of speculation among analysts and traders, who rely on customs figures and infrequent construction updates to estimate how much of the country’s imports go into strategic inventories, and for how long they will continue to fill.

…click on the above link to read the rest of the article…

SPR To Be Used To Raise Cash For US Gov

October 29, 2015

SPR To Be Used To Raise Cash For US Gov

The U.S. Congress is moving on a budget deal to avert a standoff over raising the debt ceiling, at least until 2017. The emerging budget deal calls for some modest increases in government spending, including on defense, along with some tweaks to Social Security and Medicare.

But the budget deal contains a novel way to raise the funds needed to pay for the increase in spending: selling off oil from America’s strategic petroleum reserve (SPR).

The proposal calls for the sale of 58 million barrels of oil from the SPR, spread out over six years between 2018 and 2024. The Congressional Budget Office predicts the move will raise over $5 billion.

Related: Stop Blaming OPEC For Low Prices

The SPR was created in the aftermath of the Arab Oil Embargo in the 1970s, which led to price spikes, fuel rationing and long lines at gasoline stations. The SPR was to be used as a tool to ensure against supply disruptions. Tucked away in salt caverns along the Gulf Coast in Louisiana and Texas, the SPR holds an estimated 695 million barrels of crude.

Congress has traditionally been very reluctant to touch the SPR, and there has been a general consensus in Washington DC that it should only be used in very special circumstances. For example, the SPR was tapped following the Persian Gulf War in 1990-1991 and following damage inflicted upon Gulf of Mexico energy infrastructure from Hurricane Katrina in 2005.

Any effort on behalf of the government to sell outside of these unique situations tended to spark criticism. For instance, President Barack Obama was highly criticized for selling oil in 2011 during the Arab Spring when Libyan oil supplies were knocked offline, with detractors citing no urgent supply need.

…click on the above link to read the rest of the article…

 

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