US to Release More Oil from Strategic Petroleum Reserve Than Originally Planned

US President Biden could order an additional release as early as Wednesday multiple White House officials say according to the Associated Press. Bloomberg reported that the Biden administration is looking to release another 10 million to 15 million barrels of oil from the SPR. The move is in response to OPEC+ cutting crude production by 2mbpd. A release would be the latest tranche of a 180-million-barrel program of releases that began earlier this year.  U.S. has already drawn down SPR inventories to the lowest level since 1982. The White House said President Joe Biden will speak about gasoline prices on Wednesday.

SPR Storage Sites

The U.S. Department of Energy has been drawing down crude inventory in the U.S. Strategic Petroleum aggressively this year. The levels are consistent with President Joe Biden’s plan March to release 1 million barrels per day over six months from the SPR to bring down high fuel prices.

Market Response to Additional SPR Sales

  • West Texas Intermediate crude for November delivery fell $2.64, or 3.1%, to settle at $82.82 a barrel, with the lowest level since Sept. 30, according to Dow Jones Market Data.
  • NYMEX November gasoline fell 1.6% to $2.5506 a gallon
  • NYMEX November heating oil lost 2.2% at $3.9935 a gallon.
  • November natural gas fell 4.2% to $5.745 per million British thermal units after dropping 7% on Monday. (This was a weather related move largely)
  • December Brent crude fell $1.59, or 1.7%, to $90.03 a barrel on ICE Futures Europe, the lowest since Oct. 3.

Oil prices have been falling since the initial OPEC+ inspired move. There has been more selling since Chinese President Xi at the CCP forum made it clear China will continue to follow a zero-COVID policy, raising uncertainty over Chinese oil demand through 2023.

The Energy Information Administration will release its weekly U.S. petroleum inventory report on Wednesday morning giving the market timely data on current storage levels.

About SPR

American Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts.  The SPR came back in focus after the U.S. Department of Energy announced it will release 50 million barrels of oil from the Strategic Petroleum Reserve to lower oil prices.

The crude oil is sold to accredited oil companies via online auctions, and prices are set using a five-day average bracketing the date of delivery. The Energy Department has proposed to replenish the SPR by allowing it to enter contracts to purchase oil in future years at fixed, preset prices.

There are four SPR sites in the United States of America

 Crude Oil Storage by Site (as of July 31, 2022)

  • Bryan Mound – contains 182.9 MMB in 18 caverns – 66.8 MMB sweet and 116.1 MMB sour
  • Big Hill – contains 92.2 MMB in 14 caverns – 65 MMB sweet and 27.2 MMB sour
  • West Hackberry – contains 145.3 MMB in 21 caverns – 102.2 MMB sweet and 43.1 MMB sour
  • Bayou Choctaw – contains 39.3 MMB in 6 caverns – 1.1 MMB sweet and 38.2 MMB sour

Current authorized storage capacity is 714 million barrels

The highest the SPR has ever been was 726.6 million barrel it’s then authorized storage capacity on December 27, 2009; the inventory of 726.6 million barrels was the highest ever held in the SPR.

Current SPR Inventory

US SPR Nov 19, 2021
SPR Sites and Refining Centers

SPR Inventory Milestones

  • 2008.  Prior to Hurricane Gustav coming ashore on September 1, 2008, the SPR had reached 707.21 million barrels, the highest level ever held up until that date.  A series of emergency exchanges conducted after Hurricane Gustav, followed shortly thereafter by Hurricane Ike, reduced the level by 5.4 million barrels.
  • 2005.  Prior to the 2008 hurricane releases, the former record had been reached in late August 2005, just days before Hurricane Katrina hit the Gulf Coast.  Hurricane Katrina emergency releases of both crude oil sales and exchanges (loans) totaled 20.8 million barrels.
  • 1977.  First oil was delivered to the newly constructed SPR, 412,000 barrels of light sweet crude. 

Current days of import protection in SPR – At the end of CY 2021 (as of December 31, 2021), the SPR’s crude oil inventory was 594.7 MMbbl.  This is equivalent to approximately 1,206 days of supply of total U.S. petroleum net imports.

International Energy Agency requirement – 90 days of import protection (both public and private stocks).  In past years, the United States has met its commitment with a combination of SPR stocks and industry stocks.  The days of import protection may vary based on actual net U.S. petroleum imports and the inventory level of the SPR. 

Average price paid for oil in the Reserve – $29.70 per barrel

Investment to date – About $25.7 billion ($5 billion for facilities; $20.7 billion for crude oil).

Drawdown Capability

  • Maximum nominal drawdown capability – 4.4 million barrels per day
  • Time for oil to enter U.S. market – 13 days from Presidential decision

Past Sales

  • FY 2020 Mandated Sales: 9.85 million barrels
  • FY 2019 SPR Modernization Sale: 4.2 million barrels
  • FY 2019 Mandated Sales: 10.87 million barrels
  • FY 2018 SPR Modernization Sale: 4.74 million barrels
  • FY 2018 Mandated Sales: 14.17 million barrels
  • FY 2017 Mandated Sales: 10 million barrels
  • FY 2017 SPR Modernization Sale: 6.28 million barrels
  • 2014 – March: Test Sale – 5 million barrels
  • 2011 June: IEA Coordinated Release – 30,640,000 barrels  
  • 2005 September: Hurricane Katrina Sale – 11 million barrels
  • 1996-97 October; January; April:  Total non-emergency sales – 28 million barrels
  • 1990/91 September, January: Desert Shield/Storm Sale – 21 million barrels
    (4 million in August 1990 test sale; 17 million in January 1991 Presidentially ordered drawdown)
  • 1985 – November: Test Sale – 1.0 million barrels 

Source: Department of Energy

From The TradersCommunity US Research Desk