Status: 04/01/2022 11:08 a.m
The US has released a historic amount of its national oil reserve. Oil prices are currently falling. But experts estimate that the market will not be relieved in the long term.
Oil prices fell again this morning. A barrel (159 litres) of North Sea Brent currently costs 102.80 US dollars, which is almost 20 dollars cheaper than at the end of March. The price for a barrel of the US WTI variety also fell to 98.64 US dollars.
USA release historic amount
The main reason for the falling prices is a historic release of the national oil reserve by the USA. US President Joe Biden announced yesterday that the country would make 180 million barrels of oil available from the strategic reserve. That means a million barrels of oil per day for half a year – it corresponds to around one percent of the daily global oil demand. The released oil is scheduled to hit the market in May. Biden also called on the oil companies to increase production.
“The USA is releasing a little more than 30 percent of its entire strategic reserve. Oil of this magnitude has never been released in the past 45 years since these reserves have existed,” explains Dora Borbely, Deka-Bank’s commodities expert, explaining the dimension of the Approval on request from tagesschau.de.
The US strategic oil reserve
The national petroleum reserve is an emergency stock intended to ensure access to petroleum in the event of natural disasters or national security issues. The aim is to be able to bridge a country’s potential, short-term oil supply bottleneck.
The stockpiles for the United States Strategic Oil Reserve (Strategic Petroleum Reserve) hold a maximum of 727 million barrels of crude oil (as of March 2022). Currently, slightly less than 600 million barrels of oil are stored in the four reservoirs on the Gulf of Mexico in Texas and Louisiana.
Release relieves the US market
According to the Deka Bank analyst, the US President’s main goal is to relieve consumers in the USA: “The release is primarily about replacing Russian deliveries to the USA, which are primarily processed oil products such as fuels. The US President wants to lower gasoline prices in the USA and thus relieve the burden on consumers.”
According to the analyst, the 180 million barrels that the USA are now releasing correspond roughly to the amount that Russia would have delivered to the USA in the course of this year. “This release will definitely relieve the US market for the time being. The market will relax and the prices for petrol and oil will probably go down,” says Borbely.
“Oil shortage shifts to the future”
Internationally and especially in the long term, the release will have hardly any positive effects, analysts agree. Because the release solves the problem of a shortage on the market in the short term and also causes prices to drop on the global markets. “In the long term, it will not have any effects. If the reserves are replenished later, oil price-driving effects will come into play due to the increased demand,” explains the Deka analyst. Thus, the problem of an oil shortage is only shifted into the future, since the release of the oil reserve does not change the quantities of oil available.
The analysts at the US bank Goldman Sachs share this assessment: Although the oil market is initially stabilizing, releasing oil stocks is not a permanent solution to ensure supplies. “Such a release would therefore not solve the structural supply deficit that has existed for years.” The US could at best limit the strong volatility and weaken large upward movements, Avtar Sandu, commodity manager at Phillip Futures, told the Reuters news agency.
OPEC+ do not want to increase production
At the same time, the association of oil-producing countries OPEC+ announced after a meeting yesterday that it would not increase production volumes despite the high world market prices. At their virtual meeting, the energy ministers of the 23 OPEC+ countries decided that oil production should only be increased by around 400,000 barrels per day in April. Thus, the states are sticking to the fact that the artificial limitation on the production volume will not expire until September.
There is also speculation that members of the International Energy Agency (IEA) want to release parts of their national oil reserves. An extraordinary IEA meeting has been called for today.