US Seeks Halt to Oil-Reserve Sales to Refill Depleted Stockpiles
Comment of the Day

December 01 2022

Commentary by Eoin Treacy

US Seeks Halt to Oil-Reserve Sales to Refill Depleted Stockpiles

This article from Bloomberg may be of interest to subscribers. Here is a section:

The Biden administration is seeking to stop sales from the Strategic Petroleum Reserve mandated by Congress so it can refill the emergency reserve, a move that could impact the release of 147 million barrels of crude oil.

The Energy Department is seeking to cancel or delay sales mandated by Congress in fiscal years 2024 through 2027 so that it can move forward with a White House plan to refill the oil reserve when crude prices reach around $70 a barrel, an agency official told a Senate committee Thursday. Congress has mandated the sale of 147 million barrels of oil to pay for unrelated legislative initiatives during that time frame, including 35 million barrels in fiscal 2024, according to data compiled by research firm ClearView Energy Partners. 

“It doesn’t make sense for us to be releasing oil while we’re trying to refill the SPR,” Doug MacIntyre, the department’s Deputy Director for the Office of Petroleum Reserves, said in testimony before the Energy and Natural Resources Committee. “We can’t fill and release from the same site at the same time.”

Eoin Treacy's view

It would be easy to conclude the US government had never heard the maxim “buy low, sell high” when they decided to put the floor for purchases at $70. Of course, if we instead think of the USA as a major energy producer, with an administration that is attempting to force a migration away from dependence on oil, higher prices for longer make sense.

The weakness of the dollar is also helping to support the oil price. Brent crude rebounded over the last four days but paused today below the psychological $90. That’s the lower side of the overhead trading range and a significant source of overhead resistance.

The S&P Global Oil Index is testing the 2018 highs and 2018 highs near 2000. The relative underperformance of the global index relative to the US Energy SPDR supports the view that the bulk of performance has come from US energy stocks within the broad global sector.

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