Biden administration considering largest ever release from emergency oil reserve

The sanctions on Russia and its demand to get paid in ruble have started impacting United States and members of European Union. The latest move to release oil from strategic reserves is the third attempt to reign in prices as OPEC Plus sticks to its plan on increasing output.

The Biden administration is considering releasing up to 180 million barrels of oil over several months from the Strategic Petroleum Reserve (SPR). The move would mark the third time the United States has tapped its strategic reserves in the past six months, and would be the largest release in the near 50-year history of the strategic reserves.

It is evident that the releases have not managed to lower prices as world demand has nearly reached pre-pandemic levels while supply has tightened globally.

Oil prices have surged since Russia invaded Ukraine in late February and the United States and allies responded with hefty sanctions on Russia, the second-largest exporter of crude worldwide.

Brent crude, the world benchmark, rose to about US$139/barrel earlier this month, highest since 2008, and was near US$110/barrel in Asian trading on Thursday.

Russia is one of the world’s top producers of oil, contributing about 10% to the global market (Russia exports 4 to 5 million bpd). But sanctions and buyer reluctance to buy Russian oil could remove about 3 million barrels per day (bpd) of Russian oil from the market starting in April, the International Energy Agency (IEA) has said.

The news comes just before the Organization of the Petroleum Exporting Countries and its allies, an oil producer group known as OPEC Plus that includes Saudi Arabia and Russia, meets to discuss reducing supply curbs.

The United States, Britain and others have previously urged OPEC Plus to quickly boost output. However, the group is not expected to deviate from its plan to keep boosting output gradually when it meets Thursday.

The United States currently holds 568.3 million barrels as SPR, its lowest since May 2002, according to the US Energy Department.

The United States is considered a net petroleum exporter by the IEA. But that status could change to net importer this year and then return to exporter again as output has been slow to recover from the COVID-19 pandemic.

It was not immediately clear whether a 180 million barrel draw would consist of exchanges from the reserve that would have to be replaced by oil companies at a later date, outright sales, or a combination of the two.

US Energy Secretary Jennifer Granholm said last week while on a trip to Europe that the United States and its allies in the IEA were discussing a further coordinated release from storage.

The IEA has called an emergency meeting for Friday to discuss oil supply, a spokesperson for Australian Energy Minister Angus Taylor said.

IEA member states agreed earlier in March to release over 60 million barrels of oil reserves, with 30 million barrels coming from the US-SPR.

US crude futures fell by US$4.70 to US$103.12/barrel and Brent futures declined by US$4.45, or 3.9% to US$109 a barrel on news of the potential release.

The White House said Biden will deliver remarks at 1730 GMT on his administration’s actions to reduce the impact of Putin’s price hike on energy prices and lower gas prices at the pump for American families. It did not give additional details.

High gasoline prices are a political liability for Biden and his Democratic Party as they seek to retain control of Congress in November elections.

The Biden administration is considering temporarily removing restrictions on summer sales of higher-ethanol gasoline blends as a way to lower fuel costs for US consumers, three sources familiar with the matter told Reuters.

Adding more ethanol to gasoline blends could potentially reduce prices at US gas pumps because ethanol, which is made from corn, is currently cheaper than straight gasoline.