The administration of U.S. President Joe Biden is considering releasing up to 180 million barrels of oil from the emergency oil reserve over several months amid the White House efforts to cut fuel prices, four sources said Wednesday.
The latest amount of U.S. oil release being considered, which is equivalent to about two days of global demand, 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 Petroleum Reserve (SPR).
The International Energy Agency (IEA) member countries are also set to meet on Friday at 12 p.m. GMT to decide on a collective oil release, a spokesperson for New Zealand energy minister said in an email, aimed at calming global crude prices that scaled 14-year highs this month amid the Russia-Ukraine conflict.
"The amount of the potential collective release has not been decided," the spokesperson for minister Megan Woods added. "That meeting will set a total volume, and per country allocations will follow," she said.
While it was unclear if the U.S. SPR draw would be part of a wider global coordinated release, the news slammed oil markets, pushing prices on both sides of the Atlantic down more than $6 a barrel.
Oil prices have surged since Russia invaded Ukraine in late February and the U.S. and allies responded with hefty sanctions on Russia – the No.2 exporter of crude. Russia is among the top three oil producers and accounts for about 14% of the world's total supply.
Sanctions and reluctance to purchase Russian oil could remove about 3 million barrels per day (bpd) of Russian oil from the market starting in April, the IEA has said.
Russia exports 4 million to 5 million bpd. Supply concerns drove up benchmark Brent crude futures to about $139 a barrel this month, highest since 2008.
News of the potential oil release comes ahead of a meeting between the Organization of the Petroleum Exporting Countries and its allies including Russia, an oil producer group known as OPEC+. The U.S., Britain and others have previously urged OPEC+ to quickly boost output.
However, OPEC+ is not expected to veer from its plan to keep boosting output gradually when it meets Thursday.
The U.S. SPR currently holds 568.3 million barrels, its lowest since May 2002, according to the U.S. Energy Department.
The U.S. 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.
The White House did not comment on the plan to release oil.
The oil release would increase supplies by 1 million barrels per day for six months and help market rebalance this year, but it does not resolve the structural supply deficit, Goldman Sachs analysts said in a note.
The White House said Biden will deliver remarks at 1:30 p.m. (5:30 p.m. 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.
Given that the U.S. is taking a "muscular stance toward Moscow, promising more sanctions if Russia continues to wage war in Ukraine, we believe the SPR release is being used as a tool to blunt the impact of these foreign policy decisions for U.S. consumers," RBC Capital said in a note to clients.
U.S. Energy Secretary Jennifer Granholm said last week that the U.S. and its allies in the IEA were discussing a further coordinated release from storage.
IEA member states agreed earlier in March to release over 60 million barrels of oil reserves, with 30 million barrels coming from the U.S. SPR.
The Biden administration is also considering temporarily removing curbs on summer sales of higher-ethanol gasoline blends as a way to lower fuel costs for U.S. consumers, three sources familiar with the matter told Reuters.
Adding more ethanol to gasoline blends could potentially reduce prices at U.S. gas pumps because ethanol, which is made from corn, is currently cheaper than straight gasoline.
