By William Watts
After weeks of anticipation, President Joe Biden on Tuesday opened the taps on the U.S. Strategic Petroleum Reserve, releasing a temporary flood of crude in a bid to tamp down gasoline and other energy prices while potentially provoking a showdown with OPEC and its allies.
“Today, the president is announcing that the Department of Energy will make available releases of 50 million barrels of oil from the Strategic Petroleum Reserve to lower prices for Americans and address the mismatch between demand exiting the pandemic and supply,” the White House said in a statement.
The move was coordinated with China, India, Japan, South Korea and the U.K., which were also releasing reserves, the White House said. It comes as Biden faces pressure to bring down gasoline prices.
The Biden administration had tried unsuccessfully in recent months to persuade the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to speed up production increases in response to surging crude prices.
Oil futures initially extended losses after the announcement, but then pared or temporarily erased the decline. Traders may be adhering to the “sell the rumor, buy the fact” adage.
The threat of an SPR release had hung over the market for weeks, with futures for both U.S. benchmark West Texas Intermediate and global benchmark Brent crude posting four consecutive weekly losses and hitting seven-week lows last week.
WTI crude for January delivery CL00, +0.61% CLF22, +0.61% was down 49 cents, or 0.6%, at $76.26 a barrel on the New York Mercantile Exchange early Tuesday New York time, while January Brent crude BRN00, +1.05% BRNF22, +1.05% was off 3 cents at $79.67 a barrel after briefly trading in positive territory on ICE Futures Europe.
Gasoline futures were modestly lower Tuesday, with the December contract RBZ21, +0.64% down 1.03 cents, or 0.5%, at $2.4499 a gallon on Nymex. Gasoline futures are down around 5% so far in November. Prices at the gasoline pump last week stood not far off their highest U.S. Thanksgiving holiday period level on record.
The U.S. Strategic Petroleum Reserve, or SPR, is the world’s largest supply of emergency crude oil, according to the Energy Department. The federally owned oil stocks are stored in underground salt caverns at four storage sites in Texas and Louisiana.
The Energy Department said it would make up to 32 million barrels of SPR crude oil available to refiners through an exchange, while accelerating the timeline for a sale of an additional 18 million barrels mandated by Congress.
While the threat of a coordinated SPR release was credited with pulling crude prices back from recent highs, analysts have questioned how much lasting impact the move will have. Crude ended higher on Monday after Bloomberg reported that OPEC+ were prepared to rethink their planned production increases in response to threatened reserve releases.