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United States to release oil from reserves in coordination with other countries to lower gas prices

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President Joe Biden said on Tuesday that the administration would exploit the strategic oil reserve as part of a global effort by energy-consuming countries to calm the rapid rise in fuel prices in 2021.

The coordinated release between the United States, India, China, Japan, the Republic of Korea and the United Kingdom is the first of its kind.

In total, the United States will release 50 million barrels of SPR. Of the total, 32 million barrels will be a trade in the next few months, while 18 million barrels will be an acceleration of a previously authorized sale.

“The president is ready to take further action, if necessary, and is ready to use his full authority working in coordination with the rest of the world to maintain an adequate supply as we emerge from the pandemic,” the White House said in a statement.

Tuesday’s announcement follows the administration’s announcement for months that it was studying the tools at its disposal as West Texas Intermediate crude futures peaked in seven years above $ 85.

Prices at the pump have followed the rally, and are currently hovering around their highest level in seven years. The national average for a gallon of gasoline stood at $ 3,409 on Monday, according to AAA, from $ 2.11 a year ago. Crude prices are between 50 and 60 percent of what consumers pay to refuel, AAA said.

“It’s a timely move to try to bring down oil prices,” said John Kilduff, partner at Again Capital. “This additional supply should help fill the production gap before winter, especially if we also get confirmation of a significant supply from several of the main Asian consuming countries,” he added.

As of November 19, the SPR held 604.5 million barrels spread over four sites, according to the Department of Energy. It takes 13 days after a presidential announcement for oil to hit the market, according to DofE.

In total, the SPR, founded in 1975 after the Arab oil embargo, can hold 727 million barrels.

The SPR can be exploited in three ways, according to the DofE: a full drawdown to counter a “severe power outage,” a drawdown limited to 30 million barrels, or a drawdown for a test trade or sale.

US oil fell 1.9% to a low of $ 75.30 a barrel after the announcement, before recovering some of those losses. The contract last traded 34 cents lower to $ 76.41. International benchmark Brent crude came in at $ 79.98 per barrel, up 34 cents.

In August, the Biden administration called on OPEC and its oil-producing allies to increase production in the face of rising energy prices. But the group has decided to maintain its previously agreed schedule of increasing production by 400,000 barrels per month.

In April 2020, the group made the unprecedented decision to withdraw nearly 10 million barrels per day from the market as the pandemic sapped demand for petroleum products. Other producers, including the United States, also cut production as oil prices plunged to levels never seen before.

Since then, demand has rebounded as producers have been slow to get oil back to market, pushing crude to multi-year highs.

“Today marks the official emergence of an ‘anti-OPEC +’, a group of major oil-consuming countries that are taking over supply dynamics as part of the unconventional and unprecedented release of oil reserves. strategic oil to create an artificial slack in the oil market and deal a negative blow to oil prices, ”said Louise Dickson, senior oil markets analyst at Rystad Energy.

“The supply support is intended to curb oil prices and keep the pandemic GDP recovery on track, especially in the context of an increasingly inflationary macroeconomic environment,” she said. added.

Sources

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2/ https://www.cnbc.com/2021/11/23/biden-says-us-will-tap-strategic-petroleum-reserve-as-gas-prices-hover-around-7-hear-high.html

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