Commodities
Factbox-Biden administration slowly puts oil back into the SPR emergency stash
© Reuters. FILE PHOTO: An oil storage tank and crude oil pipeline equipment is seen during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson/File Photo
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WASHINGTON (Reuters) – The administration of President Joe Biden is slowly putting oil back into the Strategic Petroleum Reserve, after selling a record amount from the emergency stockpile in 2022.
Here are some facts about the SPR and U.S. efforts to replenish it.
WHAT IS THE SPR?
It is the world’s largest emergency oil stash. The United States created the SPR in 1975 after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy. Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico. The oil is held in heavily-guarded underground caverns at four sites on the Texas and Louisiana coasts.
HOW MUCH SPR OIL WAS SOLD IN 2022?
In 2022, the administration announced a sale of 180 million barrels over six months from the reserve, the largest ever SPR sale, in an effort to control fuel prices after Russia’s invasion of Ukraine. The Energy Department also conducted a sale of 38 million barrels in 2022 that had been mandated in laws passed by Congress.
HOW MUCH IS COMING BACK?
The administration has bought back 13.82 million barrels, of domestically produced, sour, or relatively high sulfur oil that many U.S. refineries are engineered to distill into fuels.
It also has sped up by several months the return of nearly 4 million barrels to the SPR from loans to oil companies. The oil is expected to be returned by February instead of mid-year.
The pace of the buybacks is being tempered by planned life extension maintenance at two of the four SPR sites, department officials have said.
Quick buybacks of much larger volumes could also risk pushing up oil and gasoline prices ahead of the presidential election in November, analysts have said.
HOW MUCH OIL DOES THE SPR HAVE NOW?
The reserve currently holds 354.4 million barrels, nearly 60% of which is sour crude. The most oil it has ever held was nearly 727 million barrels in 2009.
The sales in 2022 sank the level of the SPR to the lowest in about 40 years, and even with the buybacks, the level is clinging to its lowest since late 1983.
That angered some Republicans who accused the Democratic administration of leaving the U.S. with a thin supply buffer to respond to a future crisis.
The administration says it has a three-pronged strategy to return oil to the reserve. That includes buying back oil, the return of oil loaned from the SPR to companies, and its work with Congress to cancel congressionally mandated sales of 140 million barrels of SPR oil through 2027 that both Democratic and Republican lawmakers had voted for in previous laws.
The U.S., which is producing oil at record volumes with more increases expected this year, also has more crude in the SPR than it is required to as a member of the Paris-based International Energy Agency, the West’s energy watchdog. Under the agreement, the U.S. is required to hold 90 days’ worth of net petroleum imports.
AT WHAT PRICE DOES THE U.S. WANT TO BUY OIL BACK?
The administration says it sold the 180 million barrels at an average of about $95 a barrel. It wants to buy back oil at $79 a barrel or less. The current West Texas Intermediate oil price of about $72 a barrel allows such purchases. But prices could go back up given the risk of the war in Gaza expanding to the greater Middle East, or effects from the conflict in Ukraine.
DOES THE ADMINISTRATION HAVE MONEY TO BUY MORE?
The Energy Department has about $3.67 billion left in its SPR buyback fund, enough to purchase about 46.5 million barrels at the $79 a barrel price, according to ClearView Energy Partners, a nonpartisan research group.
The department says it will release monthly plans to buy back oil in increments through at least May.
The last bid of up to 3 million barrels for April delivery was released on Jan. 3.
(Reuters) – Citi on Wednesday raised its oil price outlook for 2025 due to geopolitical risks centred on Russia and Iran, but noted prices were likely to ease through the second half of the year.
“The oil outlook could see heightened, sustained geopolitical risks in Iran/Russia-Ukraine potentially wipe out the 2025 oil balance surplus, but the Trump administration appears intent on dealmaking,” the bank said in a note.
Citi expects to average $67 a barrel in 2025, up from a previous forecast of $62. It also said it was lifting its average WTI crude forecast to $63/bbl, without giving its former view.
It added that it was revising up its quarterly Brent forecasts to $75/bbl in the first quarter, $68/bbl in the second, $63/bbl in the third, and $60/bbl in the fourth, also without specifying its previous expectations.
The Biden administration on Jan. 10 sanctioned more than 100 tankers and two Russian oil producers, leading to a scramble by top buyers China and India for prompt oil cargoes and a global rush for ship supply as dealers of Russian and Iranian oil sought unsanctioned tankers.
U.S. President Donald Trump has since laid out a sweeping plan to maximise oil and gas production, including declaring a national energy emergency to speed up permitting, rolling back environmental protections, and withdrawing the U.S. from the Paris climate pact.
Citi said the timing and nature of President Trump’s actions regarding Iran and Russia could be defining features of the oil market and pricing during 2025. It forecast a surplus of 0.8 million barrels per day for the year.
By Arunima Kumar
(Reuters) -Oil prices held steady on Wednesday, with traders closely watching President Donald Trump’s proposed tariffs and the potential impact of the national energy emergency he declared on his first day in office.
futures inched 4 cents higher, or 0.05%, to $79.33 per barrel at 1246 GMT. U.S. West Texas Intermediate crude futures edged 2 cents lower, or 0.03%, to $75.81.
“As more details emerge regarding energy production and trade agreements, traders will assess the balance between economic growth, energy security, and policy risks,” said Dilin Wu, research strategist at Pepperstone.
Trump said late on Tuesday that his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada could face levies of around 25%.
He also vowed duties on European imports, without providing further detail.
“The oil market’s attention is slowly turning away from U.S. sanctions against Russia towards President Trump’s potential trade policy,” said ING analysts, adding that the energy complex has come under pressure with the growing threat of tariffs.
The U.S. president had said his administration would “probably” stop buying oil from Venezuela, among the top suppliers of oil to the country.
Trump laid out a sweeping plan to maximise domestic oil and gas production, including declaring a national energy emergency to speed permitting, rolling back environmental protections, and withdrawing the U.S. from the Paris climate pact.
Trump’s policy is unlikely to spur near-term energy investment or change U.S. production growth, analysts at Morgan Stanley (NYSE:) wrote in a note, adding that it could, however, moderate potential erosion of refined product demand.
Meanwhile, a rare winter storm churned across the U.S. Gulf Coast on Tuesday.
Elsewhere, North Dakota’s oil production was estimated to be down by between 130,000 and 160,000 barrels per day (bpd) due to extreme cold weather and related operational challenges, the state’s pipeline authority said on Tuesday.
By Enes Tunagur
LONDON (Reuters) – Oil prices fell on Tuesday as investors assessed U.S. President Donald Trump’s plans to apply new tariffs later than expected while boosting oil and gas production in the United States.
futures were down $1.42, or 1.77%, to $78.73 per barrel at 1116 GMT. U.S. West Texas Intermediate crude futures were down by $1.97, or 2.53%, at $75.91. There was no settlement in the U.S. market on Monday due to a public holiday.
Pressuring prices on Tuesday was a stronger U.S. dollar, as its strengthening makes oil more expensive for holders of other currencies.
“The current weakness is most probably Trump and dollar-related,” said PVM analyst Tamas Varga.
The dollar rebounded after Trump’s comments on imposing tariffs against Mexico and Canada, Varga added, noting that the dollar’s strength is negatively impacting oil prices.
Trump said he was thinking of imposing 25% tariffs on imports from Canada and Mexico from Feb. 1, rather than on his first day in office as previously promised.
“The initial sense of relief that trade measures weren’t an immediate focus on Trump’s ‘Day 1’ was quickly offset by reports of 25% tariffs on Mexico and Canada as early as February, which saw risk sentiments turn,” said Yeap Jun Rong, market strategist at IG.
Trump did not impose any sweeping new trade measures right after his inauguration on Monday, but told federal agencies to investigate unfair trade practices by other countries.
The U.S. president also said his administration would “probably” stop buying oil from Venezuela. The U.S. is the second-biggest buyer of Venezuelan oil after China.
Trump also promised to refill strategic reserves, a move that could be bullish for oil prices by boosting demand for oil.
Also weighing on prices on Tuesday was the potential end to the shipping disruption in the Red Sea. Yemen’s Houthis on Monday said they will limit their attacks on commercial vessels to Israel-linked ships provided the Gaza ceasefire is fully implemented.
“Reopening of the Suez Canal will create a short-term abundance of supply given the shorter journey times, and that may also weigh on prices in the short term,” said Saxo Bank analyst Ole Hansen.
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