The U.S. will hit the market with around 200,000 barrels day of sour crude from the Strategic Petroleum Reserve; sale would happen from October to December, few months after the U.S. completed April-June deliveries averaging 180,000 b/d.
As S&P Global Platts reports, the sale would help the U.S. to fulfill budget bills from 2015 and 2018 during fiscal 2022; which begins Oct. 1. However, the precise volume “will not become clear until the transaction results are disclosed by Sept. 13.” Said Paul Sheldon, S&P Global Platts Analytics chief geopolitical adviser.
Platt’s Analytics previous forecast was that the Department of Energy would sell only 15,5 million barrels during the first quarter of fiscal year 2022; however, it has uplifted such forecast to 19 million barrels; as flexibility built into the 2018 budget bill allows DOE to frontload some of the SPR sales required between fiscal years 2022 and 2025.
Sheldon also remarked that the sale might be happening as the Biden administration sees a good opportunity to monetize the oil; specially after Biden urged OPEC to increase its output. “While an increasingly heavy delivery schedule beginning in fiscal 2023 may raise an incentive to proportionally increase near-term sales.” Sheldon said.
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U.S. with some political wins after SPR sale
The sale would modestly complicate the OPEC+ plan to boost production by five increments of 400,000 barrels day; as demand for oil and petroleum products has been hit once again by the pandemic and the coronavirus variant, Delta.
However, “rising demand concerns over coronavirus variants could realistically cause Saudi Arabia and its partners to slow down; or freeze the quota increases.” Sheldon remarked. “On the other hand, rising risks to our assumed Iran framework deal in October could create even more space for OPEC+ to regain market share through the end of 2021.”
On the other hand, ClearView Energy Partners, in a research note, said the super-sized sale “could have modest downside impacts to price.” As the market expects higher outputs from OPEC; those impacts could be bigger if the SPR sale arrives in October, during refinery turnarounds.
Finally, S&P says that DOE’s decision to go ahead with the super-sale, would also have political gains for the White House. “Voters can see gasoline prices a lot more easily than they can see energy transitions; and the White House has thin congressional majorities to defend.” ClearView said.