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Oil Rebounds as DOE Looks To Buy 3 Million Barrels For SPR In March

With oil plunging an (almost) unprecedented 7 weeks in a row, the longest such stretch since 2018...

... and many momentum chasing experts - the same ones who two months ago were calling for triple digit oil - already predicting that Saudi Arabia will soon be forced to do what it did in March 2020 when it flooded the market with oil to crush higher cost competitors, this morning we got a reminder of just why oil isn't trading far, far higher.

For those confused, the reason why oil is not in the triple digits is the drain of more than 300 million of barrels of oil from the SPR under the Biden administration ...

... which slammed oil prices during late 2022 and early 2023 as the initial shock from the Ukraine war faded and as the US slashed its emergency reserve to offset declining global stockpiles as well as to flood the market.

The problem is that having eliminated roughly half of the US strategic petroleum reserve at a time when China has tactically built up its own to over 1 billion barrels (why oh why, would China be doing this, the narrator asked rhetorically), has left the US not only exposed to any true emergency (and there will be plenty) but also threatens to collapse the salt caverns which make up the SPR and which have not been this empty since the 1980s.

It's also why there has been pressure on Biden to at least start refilling the SPR. And today, Biden's DOE announced that it was seeking 3 million barrels for the Strategic Petroleum Reserve for delivery in March, according to a solicitation Friday.

The news pushed oil to session highs, above $71, after trading as low as $68.8 yesterday, the lowest price since July.

And while we applaud the DOE initiative to at least pretend to refill the SPR, we point out that there is a reason why the refilling process is so slow: if 3 million barrels bought over 1 month is enough to push the price of oil almost $2 higher, the DOE - whose primary mandate is to not push oil, and thus gasoline, prices higher in the election 2024 year - may just get cold feet after this latest solicitation and shelve any future refills. And even if the current pace of refilling continues, assuming 3 million barrels per month, it will take 96 months, or just about 8 years, for the SPR to go back to where it was at the start of the Biden administration.

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Leave a comment
  • cihan on December 09 2023 said:
    The Biden administration has exhausted its reserve oil. If something suddenly happens around the world, they will fly their planes with alcohol instead of oil. On the contrary, China has inflated its reserves. America must fill its reserves as soon as possible, regardless of prices.
  • cihan on December 09 2023 said:
    The Biden administration has exhausted its reserve oil. If something suddenly happens around the world, they will fly their planes with alcohol instead of oil. On the contrary, China has inflated its reserves. America must fill its reserves as soon as possible, regardless of prices. Of course my long positions make profit????????
  • Mamdouh Salameh on December 09 2023 said:
    While pumping an estimated 220 million barrels (mb) of the United States’ SPR oil in 2021 and 2022 into the global oil market may have had some symbolic psychological impact, their impact on prices was hardly noticeable.

    Yet. It is a ploy that the US may never resort to for years to come.

    Based on the current rate of refilling, it will take probably a minimum of 15-20 years to refill the SPR to its previous level with the distinct possibility that it may never be. Refilled again.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • George Doolittle on December 09 2023 said:
    Why would the US taxpayer be paying for a "strategic petroleum reserve" when a simple ban on exports would suffice? Anyhow $slb Slumberger is dirt cheap at the moment or certainly on sale anyways as the incredible mess that is onshore US oil drilling has a lot of cleanup work that needs doing. One reason for the collapse of oil are the really bad vehicles the ICE Platform mfg'ers continue to make and overprice *BIG TIME* actually mainly though not exclusively because of the insanely complex "center stack" electronics and all of the cameras hither and yon built out for greater safety and autonomy...all great things in my view but again incredibly complex and expensive "but for Tesla" which I think explains the high adoption rate of pure BEV upon North America anyways namely a far more robust and better built center stack and better thought out wiring and "connectivity" now as well actually. With the 48 volt based Tesla Cybertruck now released though seemingly still not in full run rate production expect more possibly much more pure BEV to hit USA highways for 2024 Calendar Year as both Ford and Rivian ramp up production as well presumably Polestar and presumably GM and Dodge as well. More stand up e-scooters, more e-bikes more lawn and gardening equipment from the lines of E-Go none of which need an internal combustion engine or power train or petrol. This won't stop Hyperinflation 2.0 in the USA of course quite the opposite gotta have even more of that now as, well ...look at the failure of oil speculators to drive up the price to triple digits by way of specific example given here. Long $lucid Lucid Motors strong buy.

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