The US and its allies are releasing 60 million barrels of oil from their strategic reserves after crude oil reached a nine-year high. invasion of ukraine,
The group said on Tuesday that all 31 countries that are members of the International Energy Agency agreed to “send a strong message to oil markets” that Russia’s invasion of Ukraine would result in “no shortage of supplies”.
Oil prices climbed even higher after the announcement, with WTI rising to $106 for a 10 percent gain that day, as investors appeared disappointed that the strategic release was not big. This is the highest price for WTI since January 2011.
Roughly half of the coordinated release will come from the US, which has strategic reserves of about 580 million barrels, housed in deep underground storage caves built into salt domes. Texas And louisiana Gulf Coast.
The IEA board took this decision at an extraordinary meeting of energy ministers chaired by US Energy Secretary Jennifer Granholm.
The Strategic Petroleum Reserve in Freeport, Texas is seen in a file photo. The US and its allies are releasing 60 million barrels of oil from their strategic reserves
Oil prices climbed even higher after the announcement, with WTI up 10 per cent on the day to $106. This is the highest price for WTI since January 2011.
In addition to the United States, other members of the organization include the United States, Germany, France, the United Kingdom, Japan, and Canada.
IEA members have emergency reserves of 1.5 billion barrels of oil. The release amounts to 4 percent reserves for 30 days, or about 2 million barrels per day.
It takes about 13 days for oil from US strategic reserves to hit the market after the President’s assent.
“The situation in the energy markets is very serious and we need to pay close attention,” said Fateh Birol, executive director of the IEA. ‘Global energy security is at risk, putting the world economy at risk during a critical phase of recovery.’
Russia plays a large role in global energy markets as the third largest oil producer.
It exports 5 million barrels of crude oil per day, which is about 12 percent of the global oil trade. Some 60 percent goes to Europe and another 20 percent to China.
The decision came as oil prices rose on Tuesday, with US benchmark crude crossing $100 a barrel for its highest price since 2014.
The conflict in Ukraine has rocked markets globally and raised concerns about economic growth due to rising inflation and central banks’ plans to raise interest rates.
It is only the fourth time in history that the IEA has made a coordinated decline since reserves were established in the wake of the Arab oil embargo in 1974.
The prior emergency release came amid the US intervention in the 1991 Gulf War, after Hurricane Katrina in 2005, and the Libyan civil war in 2011.
Drivers pass a petrol station in Los Angeles last week. California has the highest gas prices in the US, with regular gasoline averaging $4.827 for a gallon.
Rising oil prices have already pushed up gasoline prices for Americans. For every $10 increase in oil prices, gas increases by about 20 cents.
In November, US President Joe Biden announced the release of 50 million barrels of oil in coordination with several other energy-importing countries, but the measure had only a fleeting effect on oil prices, which have been rising steadily.
On Tuesday, global benchmark Brent crude for April was up $7.83, or 8 percent, at $105.80 a barrel at 10.46 a.m. EST.
US benchmark West Texas Intermediate (WTI) crude for April rose $8.27, or 8.6 percent, to $103.99.
During the season, Brent crude reached its highest level since August 2014 and WTI’s highest level since July 2014.
WTI was headed for its biggest daily percentage gain since May 2020, with Brent the biggest since August 2021.
Session highs for US distillate and gasoline futures were also the highest since 2014.
John Kilduff, partner at Again Capital in New York, said: “Oil climbing on the wall of Ukraine’s war is a matter of concern.
US drivers are seeing a gradual increase in prices at gas pumps due to rising oil prices. The map above shows which states have the highest average prices and which have the lowest
He said traders may be disappointed that IEA countries only want to release about 60 million barrels from SPR, rather than a larger release.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, known as OPEC+, are due to meet on Wednesday.
“OPEC will stick to its original plan of (+) monthly 400,000 barrels per day (bpd) growth, which will not ease fears,” said Tamas Varga of PVM Oil Associates.
Rising oil prices have already pushed up gasoline prices for Americans. For every $10 increase in oil prices, gas increases by about 20 cents.
The national average price of regular unleaded gasoline hit $3.61 on Monday, eight cents higher than the week-ago average of $3.532.
According to the AAA Gas Price Index, that’s 25 cents higher than the month-ago average of $3.356 and about 90 cents higher than the year-ago average of $2.717.
Californians are paying the highest prices, paying an average of $4.827 for a gallon of regular unleaded gas as of Monday, about eight cents more than the week ago’s average of $4.741.
That’s 19 cents from a month ago’s average of $4.637 and $1.14 from last year’s average of $3.681, AAA reported.
Fast Facts About the US Strategic Petroleum Reserve
The Strategic Petroleum Reserve is a US government complex of four sites with deep underground storage caves built into salt domes along the Texas and Louisiana Gulf Coasts.
History
After oil supplies were interrupted during the 1973–1974 OPEC oil embargo to reduce future supply disruptions, the US created its own petroleum reserves in 1975. The first oil in the reserve was delivered in 1977.
current inventory: Of the total storage capacity of 714 million barrels, about 580 million barrels are reserved.
Storage of Crude Oil by Site (by Jan 31, 2022)
- Bryn Mound – Holds 218.2 MMB in 20 caverns – 66.6 MMB sweet and 157.5 MMB sour.
- Big Hill – Holds 129.9 MMB in 14 caves – 65 MMB sweet and 74.4 MMB sour.
- West Hackberry – Holds 180 MMB in 22 caves – 102.2 MMB sweet and 83.5 MMB sour.
- Bayou Choctaw – Holds 60.1 MMB in 5 caves – 18.9 MMB sweet and 52.1 MMB sour.
Oil pipelines stand at the US Department of Energy’s Brian Mound Strategic Petroleum Reserve in Freeport, Texas in a file photo
The US Strategic Petroleum Reserve currently holds 580 million barrels of oil.
Highest list: The SPR was filled to its then authorized storage capacity of 727 million barrels on 27 December 2009; The inventory of 726.6 million barrels was the highest ever in the SPR.
Average price paid for oil in reserve: $29.70 per barrel
drawdown capacity
- Maximum Nominal Drawdown Capacity – 4.4 million barrels per day
- Time of entry of oil into the US market – 13 days from the decision of the President
Investments till date: About $25.7 billion ($5 billion for facilities; $20.7 billion for crude).
Present Days of Import Protection in SPR: At the end of CY 2019 (as on December 31, 2019), SPR’s crude oil inventory stood at 634.9 MMbbl.
This equates to approximately 1,069 days of supply of total US petroleum net imports.
A crude oil pipeline stands at the US Department of Energy’s Bryan Mound Strategic Petroleum Reserve in Freeport, Texas in a file photo
Coordinated Emergency Releases Before SPR
1991: Release of 17.3 million barrels to reduce market disruption during the Persian Gulf War following the invasion of Kuwait by Iraq.
2005: Release of 60 million barrels due to supply disruptions by Hurricane Katrina.
2011: Release of 60 million barrels due to disruptions in Libya and other countries.