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U.S. oil reserve drops just 0.8M bbls last week as Biden Admin winds down draws

Published 01/11/2023, 11:31 AM
Updated 01/11/2023, 11:38 AM
© Reuters.

By Barani Krishnan — Inventories in the U.S. Strategic Petroleum Reserve, or SPR, dropped by just 800,000 barrels last week, the Energy Information Administration, or EIA, reported on Wednesday as the Biden administration wound down its dependence on the emergency oil stockpile that it used intensively over the past year to add to market supply and bring down pump prices of gasoline.

The SPR's inventories stood at 371.6 million barrels during the week ended Jan. 6 versus the reading of 372.4M barrels in the previous week to Dec. 30, the EIA said in its Weekly Petroleum Status Report. The 0.8M-barrel draw for last week sharply contrasted with previous weekly declines of as much as 8.0M barrels from the reserve.

"This is probably the smallest SPR drawdown over the past year, pending confirmation from the EIA," said John Kilduff, founding partner at New York energy hedge fund Again Capital. "For all intent and purpose, the administration's dependence on the emergency oil reserve is over as the drawdowns have done their job of adding to market supply and bringing down retail prices of gasoline."

Under the guidance of President Joe Biden, the Energy Department drew more than 200M barrels from the SPR since November 2021, sending the reserve's inventories to a near 40-year low. At their current standing, the SPR's stockpiles matched December 1983 levels, the EIA's historical data shows.

The drawdowns, along with other global market developments, added to international oil supplies over the past year, slashing crude prices from a high of more than $130 a barrel in early March, right after the Ukraine invasion, to $80 a barrel or below now. Pump prices of gasoline in the United States have accordingly dropped from a record high of $5 a gallon in mid-June to a current average of $3.27, the American Automobile Association said.

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The current slowdown in SPR draws come after the Biden administration announced late last year that it was winding down its dependence on the reserve and was ready to add to its stockpile. The administration is negotiating purchases with U.S. energy firms to refill the reserve, starting with a base offer of $70 per barrel. U.S. crude hovered at under $77 a barrel in Wednesday's trade.

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