White House Releases 15 MMbbls from SPR, Reveals Restocking Plans

With oil prices still stubbornly high, Washington is running out of solutions for lowering prices. Yesterday, President Biden announced another release of 15 million barrels from the Strategic Petroleum Reserve, adding that more releases could follow “if needed.” The release comes in the aftermath of OPEC+’s announced 2 MMbpd cuts in November, which analysts expect will equate to just 1.2 MMbpd in material supply reduction. At that rate, President Biden’s release will offset OPEC+’s action for about 12 days – a start, but not enough to counteract the full effect.

The White House announced plans earlier this year to release 180 million barrels of crude oil to help keep markets balanced, of which 172 million has so far been sold. The reserve still holds a bit over 400 million barrels in it, just under two-thirds of the pre-pandemic capacity.  The release this year represents the largest withdrawal in the 40-yr history of the SPR.

In addition to announcing a withdrawal, President Biden laid out a plan for continued refilling the SPR, which is now at its lowest level since shortly after the reserve’s creation. The plan involves locking in futures contracts for months with oil prices below $70/bbl. Although markets are trading November 2022 prices in the mid-$80s, prices farther in the future are much lower. At current trading levels, that would mean the government can lock in futures contracts now for deliveries in early 2025 to begin refilling the reserve.