• 2 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 2 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 3 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 3 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 3 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 3 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 3 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 3 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 3 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 4 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 4 days Venezuelan Output Drops To 28-Year Low In 2017
  • 4 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 4 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 4 days Kinder Morgan Delays Trans Mountain Launch Again
  • 4 days Shell Inks Another Solar Deal
  • 5 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 5 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 5 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 5 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 5 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 5 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 5 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 5 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 5 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 5 days Norway Grants Record 75 New Offshore Exploration Leases
  • 6 days China’s Growing Appetite For Renewables
  • 6 days Chevron To Resume Drilling In Kurdistan
  • 6 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 6 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 6 days Nigeria Among Worst Performers In Electricity Supply
  • 6 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 6 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 7 days Saudis To Award Nuclear Power Contracts In December
  • 7 days Shell Approves Its First North Sea Oil Project In Six Years
  • 7 days China Unlikely To Maintain Record Oil Product Exports
  • 7 days Australia Solar Power Additions Hit Record In 2017
  • 7 days Morocco Prepares $4.6B Gas Project Tender
  • 7 days Iranian Oil Tanker Sinks After Second Explosion
  • 9 days Russia To Discuss Possible Exit From OPEC Deal
  • 9 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
Alt Text

The Least Compliant Country In The OPEC Deal

Kazakhstan committed to cutting production…

Alt Text

Oil Traders Have Never Been This Bullish

Speculators have placed a record…

Dipping into US Strategic Oil Reserves: A Speculator's Bonanza

Dipping into US Strategic Oil Reserves: A Speculator's Bonanza

The White House is keeping the rumor-mill afloat with hints that it may draw from US strategic oil and petroleum reserves, watching the market respond on the speculation with a slight fall in oil prices, but this is just a testing of the waters.

America has a 696-million barrel Strategic Petroleum Reserve stored away in underground salt caverns in two US states, Texas and Louisiana, in the event of an energy supply emergency. It may sound like a lot, but when you consider that the US imports over 300 million barrels of oil and petroleum products monthly, the buried reserves are meager.

So when mainstream media starts reporting about “anonymous White House sources” hinting that President Obama is considering releasing oil from the reserve, you have to wonder why. Most likely, they are just testing the potential public response to this.

Oil prices have risen to around $120 per barrel in the past weeks, after seeing a drop to around $90 per barrel in July. Earlier this year, before oil prices hit the July low, the White House was also considering dipping into the country’s reserves, but the July drop made this unnecessary.

Clearly nothing has been decided yet. Gas prices are also up around the 3 September Labor Day holidays in the US, and all eyes will be on the post-Labor Day fluctuations. Meanwhile, the White House is ensuring that the “rumor” is alive but careful not to give any suggestions as to how much strategic reserves would be released in this eventuality.

Tapping into US strategic reserves requires support from nations belonging to the International Energy Agency (IEA). When the US was considering the same earlier this year, Western countries like the UK, Germany and France were supportive, citing concerns about the impact of high oil prices on the global economy and also about Iran, for which high oil prices somewhat eases sanctions.

It is still not clear whether IEA countries would support a US release of strategic reserves now. The situation is not perhaps as dire as it was earlier this year.

At this time last year, the IEA and the US jointly tapped into strategic reserves to bring down oil prices as a result of the conflict in Libya, among other things. They drew some 60 billion barrels in strategic reserves altogether.

What happened to gas prices during the 2011 strategic reserve drawdown? Well, not much, the pumps barely had time to respond. While oil prices fell by some $7 per barrel, they had already rebounded within a week. The only benefit was to the speculators.

Would it lower gas prices ahead of the November 6 presidential vote? Even the rumor that the US might draw down on strategic reserves could help lower the price of gas at the pumps, however temporarily. On Friday, 24 August, the price of oil dropped to $95 per barrel on the rumor. 

Republicans are all over this, of course, perceiving it as an obvious political move ahead of elections, and not in the country’s interest.

Tapping into strategic reserves would, as it did last year, result in only a very temporary reduction in gas prices. So if the point is to lower gas prices ahead of elections, it’s too early: prices would rebound before the crucial vote.

The average American consumer is unlikely to benefit much from such a move, but it will indeed be a speculator’s bonanza.

By. Jen Alic of Oilprice.com




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News