The unprecedented decision by Biden to release 180 million barrels of oil from the country's strategic petroleum reserve over the next six months has sent oil prices below $100. While plenty of upside risks remain, oil prices are on course to see their largest weekly decline in two years.
Oilprice Alert. The decision by Biden to release 180 million barrels of oil from the SPR demonstrates just how desperate the situation in oil markets has become. Make sure you sign up for Global Energy Alert to read this week's analysis of what it all means.
Friday, April 1st, 2022
In a week that saw OPEC+ implementing its latest production increases and the United States announcing an unprecedented SPR release, oil prices saw their largest weekly decline in more than 2 years. Whilst the OPEC+ decision was far from a surprise, the readiness of the Biden administration to tame runaway fuel prices pushed Brent futures closer to the $100 per barrel mark. Despite the scope and ambition of Biden's latest move, it might not be enough to keep WTI below $100 per barrel as the sheer size of Russia’s potentially sanctionable 3 million b/d seaborne flow still looms over markets.
OPEC+ Sticks to Modest Oil Output Increases. In a meeting that lasted a mere 12 minutes, OPEC+ countries agreed to add 432,000 b/d of production in May 2022 despite prospects of Russian production faltering, resisting calls from the IEA and US to ramp up production.
US Launches the Largest-Ever SPR Release. The Biden Administration kickstarted the largest-ever release of SPR crude in an attempt to bring down gasoline prices, pledging to release 180 million barrels over the next six months, equivalent to a steady 1 million b/d stream of crude.
Russia Doubles Down on its Rouble Threat. Russian President Vladimir Putin signed a decree on Thursday mandating buyers of Russian gas from ‘unfriendly countries’ to open rouble accounts in Russian banks and use those accounts to settle payments for gas delivered by Gazprom (MCX:GAZP).
US Warns India Not to Buy Too Much Russian Oil. The US State Department started expressing its discontent over India’s buying spree of heavily discounted Russian barrels, saying that any tangible increase would put New Delhi at a ‘great risk’ as Washington will try to restrict other countries’ purchases. Related: Sanctions Are Forcing Russian Companies To Consider Moving To Kazakhstan
Gazprom’s European Offices Raided Amid New Probe. The German offices of Russia’s gas giant Gazprom (MCX:GAZP) were raided by EU antitrust regulation officers, adding another twist to previous accusations of withholding gas supplies to Europe.
China’s CNOOC Intends to Leave North Sea Projects. China’s state-owned offshore producer CNOOC (HKG:0883) is readying to leave one of the North Sea’s largest fields, Buzzard, despite being its operator with a 43.2% ownership stake, seeking to garner $3 billion from the transaction.
OPEC Removes IEA From Source List. In another swing at the International Energy Agency, OPEC officials voted to remove the IEA from its list of ‘official’ secondary sources used to gauge production rates of OPEC member countries.
Tesla Signs Secret Nickel Deal with Vale. US EV maker Tesla (NASDAQ:TSLA) reportedly signed an undisclosed multi-year supply deal with Brazilian mining giant VALE (NYSE:VALE) for the supply of nickel coming from its mines in Canada.
US Authorities Want More Ethanol in Gasoline. The Biden Administration is considering the temporary removal of restrictions on summer sales of higher-ethanol gasoline as a means to decrease gasoline costs across the country, reversing a previous decision to ban E15 as it contributes to smog in hot weather.
ICE Wants to Move Clearing to Chicago. The Intercontinental Exchange is mulling a move to shift the clearing of credit default swaps (CDS) from London to Chicago as pressure from the European Union implies that ICE would no longer be able to serve EU customers after June 2025.
US Lithium Miners Up on Biden EV Battery Push. Shares of US lithium producers such as Albemarle (NYSE:ALB) or Livent (NYSE:LTHM) shot up this week after media reports on the Biden Administration seeking to invoke a law to encourage domestic production of EV battery metals.
Brussels Takes UK to WTO Court over Subsidies. The European Union launched a dispute with the United Kingdom at the World Trade Organization, arguing that London’s subsidies for low-carbon energy generation projects break WTO rules by making local content rules a part of the selection process.
PDVSA Seeking to Buy Tankers. In a move that could foreshadow an easing of US sanctions vis-à-vis Venezuela, the Latin American country’s oil company PDVSA has reportedly been looking to buy and lease several oil tankers to refresh its 30-ship fleet, paying the seller back in Venezuelan barrels.
Bunker Contamination Sends Shockwaves Across Singapore. Singapore is seeing a streak of claims coming from shipowners that have found chlorinated contaminants in their bunker fuel, leading to power loss and fuel engine blackouts.
By Josh Owens for Oilprice.com
More Top Reads From Oilprice.com:
- Russian Crude Continues To Flow Despite Harsh Sanctions
- Why We Cannot Just “Unplug” Our Current Energy System
- Europe Is Facing Supply Disruptions As Russia’s Gas-For-Rubles Deadline Looms
The last time he released 50 million barrels in the last quarter of 2021, the market and prices simply ignored them. And when the International Energy Agency (IEA) announced in January this year a release of 60 million barrels from the OECD countries oil inventories, the global oil market was totally indifferent.
The reason prices eased a bit today is that the claim that the consumers are shunning Russian oil exports was proven to be fake. If that claim was true, Brent crude could have gone to $130-$140 a barrel by now since there is no replacement for Russian oil exports now or the foreseeable future. Another reason is that there are indications that the Ukraine conflict is moving slowly towards more negotiations that could lead to an eventual settlement.
Releasing more oil from the US SPR isn’t going to fare better than previous releases in their impact on prices but may at least help slightly alleviate the tightness in the market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London