U.S. Set to Release Record Volume from Strategic Petroleum Reserves

As the Biden administration tries to lower fuel prices, the U.S. government considers releasing up to 180 million barrels of oil, equivalent to about two days of global demand, over several months from the Strategic Petroleum Reserve (SPR). If released, it would be the largest in SPR’s 50 year history and the third time the U.S. tapped its reserves in the past six months.

The International Energy Agency (IEA) members will also meet on Friday to discuss whether to collectively release oil from their reserves to ease global crude prices which reached 14 year highs this months following Russia’s invasion of Ukraine.

It is unclear if the U.S. release will be part of the wider global effort, but the news has sent prices down more than $6 a barrel on both sides of the Atlantic.

Oil prices have been soaring since Russia invaded Ukraine and the Western powers responded with wave after wave of sanctions on Russia, the world’s second biggest crude oil exporter. Russia is among the top three oil producers in the world and accounts for 14% of total global supply.

The IEA said both sanctions and reluctance to buy Russian oil could remove around 3 million barrels of oil per day (bpd) from the market starting in April. Russia exports 4 million to 5 million bpd.

Amid concerns of supply, Brent crude futures have skyrocketed this month at about $139 a barrel, their highest since 2008.

The news of U.S. release of strategic reserves comes ahead of the OPEC+ meeting. Both the United States and Britain have been urging the oil producing group to quickly boost output.

However, it is not expected that OPEC+’s position to boost output gradually will change.

The U.S. SPR currently holds 568.3 million barrels, its lowest since May 2002.

It is not clear whether the 180 million barrel release will be replaced by oil companies later, by outright sales or by a combination of the two.

High gasoline prices have become a political problem for Biden as his Democratic Party seeks to retain control of Congress in November midterm elections.

As the U.S. is taking a tough stance against Moscow and promising more sanctions if Russian aggression on Ukraine continues, the SPR decision could be made to ease the impact of foreign policy decision on U.S. consumers.

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