Fill It Up?

Nov 15th, 2024:What are the market implications if the US SPR is refilled? In a continuation of our series that discusses the potential implications for the oil and tanker markets of a second Trump administration, we will take a look at the U.S. Strategic Petroleum Reserve (SPR). As we discussed last week, the incoming president is a strong supporter of the domestic oil industry, and favors U.S. “energy independence”. On the campaign trail he has repeatedly said that he will immediately refill the SPR if he is re-elected. In today’s Tanker Opinion, we will see what this may look like from a tanker perspective. To provide some context, we should go back to Mr. Trump’s first term in office. In the early years of his administration, President Trump authorized sales from the SPR to generate revenue and reduce the federal deficit. During his full term (from January 2017 – January 2021), the SPR declined by 57 Million barrels, from 695 Million barrels to 638 Million barrels. However, this does not tell the full story. In March 2020, amid the Covid-19 Pandemic, Mr. Trump directed the Department of Energy (DOE) to refill the SPR by purchasing an additional 77 million barrels of U.S. crude. This move was aimed at supporting the domestic oil industry, which was facing significant financial challenges due to plummeting demand and low prices caused by COVID-19. However, these plans faced opposition in Congress. Congressional Democrats criticized the proposal as a “bailout” for the oil industry, leading to a lack of appropriations needed to execute these purchases. Under President Biden, the SPR declined dramatically, from 638 Million barrels in January 2021 to a bottom of 346 Million barrels in July 2023, a decline of 292 Million barrels. Most of these SPR releases were done in 2022 to support the oil market (and bring prices down) after the Russian invasion of Ukraine. Since Mid-2023, the SPR levels have gradually increased as the administration has authorized crude oil purchases to gradually refill the SPR. As of November 2024, the SPR stands at 387 Million barrels, 40 Million barrels above the Mid-2023 minimum, but still some 250 Million barrels below the level when Biden took office. Please fill in below for to continue read.