Biden, A Master of the Oil-Trade?
Originally published at Benzinga
Biden The Master Oil Trader Part III? President Refills Emergency Stash as Crude Price Slides – United States Oil Fund, Benzinga, Aaron Bry, Editor.
~~~~~~~~
The Biden administration has been slowly replenishing stocks in the Strategic Petroleum Reserve (SPR) as oil prices fell in the fourth quarter, buying crude at prices that could rate the president as an oil trading legend.
The SPR is an emergency stash of crude oil — the world’s largest — that was created to ease oil supply problems or shortages. It was created in 1975 following the Arab oil embargo that saw crude and gasoline prices spike, and caused damage to the economy.
Back in 2022, in response to a price spike after Russia invaded Ukraine, President Biden ordered the release of 180 million barrels from the SRP to calm the market, bringing the price of Nymex WTI crude back from a highs well above $100 a barrel, to below $80.
It helped also to bring gasoline prices at the pump lower during a period when inflation was nearing its July 2022 peak of 9.1%. The Biden administration was using oil as a monetary tool.
Careful Replenishing
The Department of Energy said in a statement on Thursday: “Analysis from the Department of the Treasury indicates that SPR releases in 2022, along with coordinated releases from international partners, reduced gasoline prices by as much as 40 cents per gallon.”
In October 2023, the price of WTI climbed to a high of $95. It then embarked on a two-month decline brought about by slowing demand fears as measures of economic activity pointed to a easing in growth.
As prices fell below $80 a barrel in November and December, the government slowly started buying oil to replenish SPR stocks.
Thursday’s Energy Department statement said the administration has bought back 20.13 million barrels of domestically produced crude at an average price of $76.12. It recalled nearly 4 million barrels of crude on loan to oil companies. They’re expected to arrive back at the SPR this month.
The DOE also said it was issuing a new solicitation for up to 3 million barrels to replenish the reserve further.
Biden The Oil Trader
So let’s look at the numbers to see exactly how good an oil trader Biden is. The administration sold in 2022 at an average of about $95 per barrel, the DoE said. It has so far repurchased at $76.12. That’s very savvy trading so far.
However, it can’t be judged to have been a total success until all 180 million barrels have been recovered. Much could happen to long-term price expectations over the five years the administration set for complete recovery — geopolitically and domestically.
Biden may not secure a second presidential term, and a new president could decide the SPR needs replenishing more quickly. Larger and more regular purchases could drive crude prices higher, which would raise the cost of replenishment.
On Friday, oil prices were lower, with WTI down 2.3% at $72.22 a barrel, while the United States Oil Fund
USO an exchange-traded fund that tracks the price of light-sweet crude, fell 2% to $67.69. The Energy Select Sector SPDR
XLE, which tracks the performance of U.S. oil companies, was up 0.7%.
The SPR is getting crude, very slowly.
Other observations on US petroleum “activity” since Russian sanctions disrupted the oil business in Europe: US crude oil production increased, US crude imports decreased, and US export of refined petroleum went strongly positive.
The 26 Jan 2024 Net Imports of Crude and exports of Petroleum Products cumulative is 2.5 million barrels per day more product exported than crude imported!
Weekly Petroleum Status Report (eia.gov)
Imagine how low gasoline and diesel at the pump could be if the US were not exporting it!
@paddy,
LOL! Oil is a global market. Pump prices wouldn’t be affected.
US exports of finished petroleum have averaged nearly 6 million barrels per day most of the past 2 years.
The emissions from that refining could have been avoided and the crude oil could have stayed in the NPR.
Weekly U.S. Exports of Total Petroleum Products (Thousand Barrels per Day) (eia.gov)
@paddy,
LOL! You posted “Imagine how low gasoline and diesel at the pump could be if the US were not exporting it!” Oil is a global market. Pump prices wouldn’t be affected. Nothing in your follow-up post changes that.
prior to a budget bill at the end of 2015, US oil exports had been outlawed for 40 years, except under terms of NAFTA…there were times during that period that WTI traded $10 or $12 less than Brent…the current discount generally reflects the cost of shipping..
natural gas prices are instructive….US gas prices have been swinging between $2 per mmBTU and $10 per mmBTU over the past dozen years, largely governed by the amount in storage and the domestic weather forecast…during the same period, European prices have swung between $9 and over $100…Asian prices never got that high, but have generally been higher than those in Europe…with 8 liquefaction facilities running, our LNG exports have been limited to abut 13% of what we produce…if the 40 or so North American LNG plants currently under consideration of construction ever make it to fruition, i’ll bet we lose our discount to global prices..
US oil exports since 1991, weekly spreadsheet & graph:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCREXUS2&f=W
i should mention that in a number of cases, we’re exporting oil that US refineries can’t use…for instance, many Gulf Coast refineries were designed to process heavy sour crude from Venezuela, but a lot of what we’re extracting from shale is light and sweet (low sulfur)…higher quality, but our refineries are inherently too complex to use it..
here’s the periodic table of about 150 grades of oil: https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html
most refineries can only handle a narrow range of crudes on that table….that’s why we were importing so much Russian Urals to replace the Venezuelan crude…
so while we’re exporting what we can’t process, we’re still importing what we need (again, weekly quantities with a graph):
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRIMUS2&f=W
@rjs,
I posted that oil is a global market. That was to address paddy’s comment about gasoline and oil prices at the pump. I don’t buy my natural gas at the pump, and I don’t know anyone who does. So how is your comment on natural gas prices relevant?
joel, i was just pointing out that natural gas is still a domestic market but it’s becoming global, at which time we’d expect prices to rise to global levels, just as happened to US oil prices following 2015’s change…
that was not as much of a response to you as it was me commenting tangentially to what i’d already written..
my comment directed at your exchange with paddy was this part: “prior to a budget bill at the end of 2015, US oil exports had been outlawed for 40 years, except under terms of NAFTA…there were times during that period that WTI traded $10 or $12 less than Brent…”
“from the SRP to calm”
should be SPR
Could it be that Joe Biden knows how to get things done … ?
illstrating the problem
global warming will kill us eventually.
the russians may kill us first if we don’t have enough oil to run our army.
using less oil may kill the economy as we know it
raising the price of oil 40 cents a gallon may reduce the use of petroleum
if the voters don’t kill the politicians
see the USA in your chevrolet while it lasts.
here’s a long term graph and a weekly spreadsheet on the amount of oil in the SPR:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
see that turn upward at the end of the recent steep drop? no? a magnifying glass might help…