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United States weighs largest ever draw from emergency oil reserve -sources

Economic Indicators Mar 31, 2022 04:11AM ET
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© Reuters. A U.S. postal worker puts his seatbelt on after filing up his vehicle at a gas station in Garden Grove, California, U.S., March 29, 2022. REUTERS/Mike Blake
 
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By Jarrett Renshaw, Steve Holland and Lucy Craymer

WASHINGTON (Reuters) -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 wider global coordinated release, the news slammed oil markets, pushing prices on both sides of the Atlantic down more than $6 a barrel. [O/R]

The IEA did not respond to a request for comment outside office hours. President Joe Biden will deliver remarks on Thursday on his administration's actions, the White House said.

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.

However, OPEC+ is not expected to veer from its plan to keep boosting output gradually when it meets Thursday.

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

The United States is considered a net petroleum exporter by the IEA. But that status could change to net importer this year and then return to exporter again as output has been slow to recover from the COVID-19 pandemic.

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 (NYSE:GS) analysts said in a note.

POLITICAL LIABILITY FOR BIDEN

The White House said Biden will deliver remarks at 1:30 p.m. ET (1730 GMT) on "his administration's actions to reduce the impact of Putin's price hike on energy prices and lower gas prices at the pump for American families."

It did not give additional details.

High gasoline prices are a political liability for Biden and his Democratic Party as they seek to retain control of Congress in November elections.

Given that the United States is taking a "muscular stance toward Moscow, promising more sanctions if Russia continues to wage war in Ukraine, we believe the SPR release is being used as a tool to blunt the impact of these foreign policy decisions for U.S. consumers," RBC Capital said in a note to clients.

U.S. Energy Secretary Jennifer Granholm said last week that the United States and its allies in the IEA were discussing a further coordinated release from storage.

IEA member states agreed earlier in March to release over 60 million barrels of oil reserves, with 30 million barrels coming from the U.S. SPR.

The Biden administration is also considering temporarily removing curbs on summer sales of higher-ethanol gasoline blends as a way to lower fuel costs for U.S. consumers, three sources familiar with the matter told Reuters.

Adding more ethanol to gasoline blends could potentially reduce prices at U.S. gas pumps because ethanol, which is made from corn, is currently cheaper than straight gasoline.

 

United States weighs largest ever draw from emergency oil reserve -sources
 

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Comments (33)
Benjamin USA
Benjamin USA Mar 31, 2022 10:35AM ET
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So funny to watch all the extreme right wingers get so triggered by this.
Andrew Ulferts
Andrew Ulferts Mar 31, 2022 9:22AM ET
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This is desperation. Which is bullish. Biden has never stopped selling our SPR. Look it up. He had been selling it off the entire time. Here comes our crisi$.
Angus Malarkey
Angus Malarkey Mar 31, 2022 7:51AM ET
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SPR is to be used in times of war for National Security.
Maximus Maximus
Maximus Maximus Mar 31, 2022 7:51AM ET
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There is a war
taylor jason
taylor jason Mar 31, 2022 7:17AM ET
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lmaoo china tried something similar last summer with copper which in the short term caused copper to decline, but in the long term, copper increased
Trevor Roberts
LimitUp Mar 31, 2022 6:21AM ET
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Libs always want something then when it happens they blame big oil or big somebody. The problem is big government
taylor jason
taylor jason Mar 31, 2022 6:21AM ET
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exactly, they campaigned that oil/gas companies are evil and destroying the climate, then one year later are practically begging them to pump more so they can get reelected. what a joke of an administration. instead of enacting all these sanctions, which hurts the poorer folks of the western world more than putin, they should have sent the troops to Ukraine
Dan White
Dan White Mar 31, 2022 6:15AM ET
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Of course big oil suffered from low demand during the pandemic and so they are in no hurry to develop new wells and get stuck holding the bag again when oil prices plummet. In fact, they realize that keeping production low and prices high is the best choice.
Beograd sfr
Beograd sfr Mar 31, 2022 6:04AM ET
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All Brandon's voters deserve to suffer terribly for their insanity
Dan White
Dan White Mar 31, 2022 6:04AM ET
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If Republicans wabted a tax break for Americans, they could have eliminated taxes on gasoline instead of giving tax breaks to the wealthy like they did. High gas prices are obviously not hurting the economy which is recovering nicely. It might help individuals to park their gas hogs and buy a hybrid. 45 mpg for a Honda hybrid vs. 13 mpg for a pickup is a big savings.
Warren Wesley
Warren Wesley Mar 31, 2022 6:04AM ET
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Dan White tax breaks for wealthy? trump raised zero brackets and exemptions across the board for everyone. true story
Bob Ruckle
Bob Ruckle Mar 31, 2022 5:25AM ET
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what could possibly go wrong.
Meru Pet
Meru Pet Mar 31, 2022 5:17AM ET
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and dollar is also stronger today... it looks like the US want to do everything to make the price of oil look weaker today... but it can be used as an excuse by opec to not increase production...
Meru Pet
Meru Pet Mar 31, 2022 5:17AM ET
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or not too much
Adamo Nals
Adamo Nals Mar 31, 2022 4:36AM ET
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It’s a total of one week of use. This wasteful release of oil from our strategic supply is literally one week of oil. It’s a joke and it means nothing. I’m telling everyone oil is going to $150 per barrel. Nothing can stop it. It’s simple math
 
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