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With oil stubbornly the only asset class that is pricing in if not a depression then certainly a deep recession - even as every other asset is already pricing in the inevitable Fed easing in response to said recession - and the price of WTI tumbling as low as $63 at the start of May, the credibility behind the Biden administration's promise to restock the recently drained SPR has become the butt of all jokes. As a reminder, last Fall the White House said the aim was to refill the reserve when prices were at or below about $67-$72 per barrel. Since then oil prices had fallen far below without as much as a squeak from Biden's energy guru, Hunter.
But that doesn't mean the pathological liars in the presidency will stop lying about refilling the Strategic Petroleum Reserve; in fact just the opposite... and mere days after the DOE again moved the goalposts to a June "refill", moments ago Bloomberg reported that the US is preparing to buy up to a whopping 3 million barrels of crude oil - or one tanker's worth - to begin refilling its depleted Strategic Petroleum Reserve.
After selling more than 200 million barrels from the emergency stockpile last year to curb high energy prices and arrest the collapse of Democratic approval ratings, the Energy Department plans to solicit offers to replenish the reserve, which has fallen to the lowest level since 1983, according to Bloomberg. And it doesn't stop there. The SPR got drained by another 2.9 million barrels last week, long after the Biden Administration promised to stop selling and start refilling.
In addition to direct purchases, the agency has said part of its strategy for refilling the reserve includes a return of oil from previous exchanges, and avoiding “unnecessary sales unrelated to supply disruptions.” The department successfully cancelled some 140 million barrels of oil sales mandated by Congress.
Last week, Energy Secretary Jennifer Granholm said the government would repurchase crude oil for the reserve after a congressionally mandated drawdown ends in June. She also claimed that the refill the SPR as soon as maintenance work is completed... or generally just kicking the can to doing anything at all.
Case in point: an earlier attempt to refill the reserve, via another 'gargantuan' 3 million barrel-purchase, was canceled by the Energy Department in January, saying the offers it received were either too expensive or didn’t meet other specifications.
In the end, nothing will happen, or at best the White House will buy a few barrels here and there, and claim mission accomplished. Instead, the real buying will begin only when there is no choice - just after the next geopolitical shock - and when the price of one barrel is well in the triple digits.
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