Crude oil prices rose on Monday despite the announcement last week that the Biden Administration would release the largest amount of crude oil even from the U.S. Strategic Petroleum Reserves.
The SPR release is scheduled to begin in May.
At 1:00 p.m., ET, WTI had risen $2.23 (+2.25%) to $101.50, while Brent had risen $1.70 (+1.63%) to $106.10 per barrel, reclaiming some of last week’s loss due to the SPR release announcement.
WTI slipped from $108 last week on news that the Biden Administration would release a million barrels of crude oil per day from the SPR for a period of six months, for a total of 108 million barrels. Critics of the plan argued at the time that the release—the biggest of its kind—would have little effect on the long-term trajectory of crude oil prices.
On Monday, a series of bullish factors, including Russian production dipping in March, Saudi Arabia lifting the official selling price of crude oil to Asia to record premiums, gasoline shortages in the UK due to protests, and chatter that the EU could consider energy sanctions against Russia over war crimes provided extra support to crude prices.
The first 90 million barrels of the 180 million set to be released from the Strategic Petroleum Reserve will be released between May and July, the DoE said on Monday, through two notices of sale totaling 70 million barrels, plus 20 million barrels set to be released in May. The second half of the 180 million barrels is set to be released between August and October of this year.
“The Department of Energy will execute President Biden’s authorization of an immediate release of one million barrels per day for six months from the Strategic Petroleum Reserve, and we are coordinating with our international allies and partners to join us in releasing additional oil from strategic reserves,” U.S. Secretary of Energy Jennifer Granholm said in a DoE statement.
By Julianne Geiger for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- U.S. Oil Demand Has Been Vastly Overestimated
- Are You Really Being ‘Gouged’ At The Gas Pump?
- Russian Crude Continues To Flow Despite Harsh Sanctions
In a tight global oil market at its most bullish state since 2014 and a robust global oil demand, adding 1.0 mbd will hardly impact prices and even if it does it will be very short-lived.
And to complicate matters further, US shale oil is a spent force unable to raise production in 2022 beyond 200,000-300,000 barrels a day (b/d) over the 2021 claimed average of 11.0 mbd.
Moreover, OPEC+ is refusing to lift production above the agreed volume of 400,000 b/d monthly because it strongly believes that the global oil market is still balanced. OPEC+ wants to keep whatever small spare capacity it has for use when the market becomes imbalanced.
In this environment, releasing whatever number of barrels from the SPR could only provide a very short relief at the pump. However, these barrels will have to be replaced at a later date at higher prices.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London