United States weighs largest ever draw from ‘Emergency Oil’ reserve – sources

United States weighs largest ever draw from ‘Emergency Oil’ reserve – sources

Web Desk
March 31, 2022

United States weighs largest ever draw from ‘Emergency Oil’ reserve – sources

WASHINGTON – The Biden administration is considering releasing up to 180 million barrels of oil over several months from the Strategic Petroleum Reserve (SPR), four U.S. sources said on Wednesday, as the White House tries to lower fuel prices.

The latest amount of U.S. oil release being considered, which is equivalent to about two days of global demand, would mark the third time the United States has tapped its strategic reserves in the past six months, and would be the largest release in the near 50-year history of the SPR.

The International Energy Agency (IEA) member countries are also set to meet on Friday at 1200 GMT to decide on a collective oil release, a spokesperson for New Zealand energy minister said in an email, aimed at calming global crude prices that scaled 14-year highs this month amid the Russia-Ukraine conflict.

“The amount of the potential collective release has not been decided,” the spokesperson for minister Megan Woods added. “That meeting will set a total volume, and per country allocations will follow,” she said.

While it was unclear if the U.S. SPR draw would be part of a larger global coordinated release, the news slammed oil markets, pushing prices on both sides of the Atlantic down more than $6 a barrel.

The IEA did not respond to a request for comment outside office hours.

Oil prices have surged since Russia invaded Ukraine in late February and the United States and allies responded with hefty sanctions on Russia – the No.2 exporter of crude.

Russia is among the top three oil producers and accounts for about 14% of the world’s total supply.

Sanctions and reluctance to purchase Russian oil could remove about 3 million barrels per day (bpd) of Russian oil from the market starting in April, the IEA has said.

Russia exports 4 to 5 million bpd.

Supply concerns drove up benchmark Brent crude futures to about $139 a barrel this month, highest since 2008.

News of the potential oil release comes ahead of a meeting between the Organization of the Petroleum Exporting Countries and its allies including Russia, an oil producer group known as OPEC+. The United States, Britain and others have previously urged OPEC+ to quickly boost output.

The U.S. SPR currently holds 568.3 million barrels, its lowest since May 2002, according to the U.S. Energy Department.

It was not immediately clear whether a 180 million barrel draw would consist of exchanges from the reserve that would have to be replaced by oil companies at a later date, outright sales, or a combination of the two.

The White House did not comment on the plan to release oil.

The oil release would increase supplies by 1 million barrels per day for six months and help market rebalance this year, but it does not resolve the structural supply deficit, Goldman Sachs analysts.