New York — ICE September Brent fell $3/b to $72.33/b during late-morning US trading Monday with talk of a possible US Strategic Petroleum Reserve stock release as well as reports that Saudi Arabia and Russia may boost volumes.
NYMEX August WTI was down $2.86 at $68.15/b. NYMEX August RBOB was down 8.87 cents at $2.0180/gal while August ULSD was down 6.94 cents at $2.0640/gal.
Reports over the weekend suggested the Trump administration is considering releasing additional supplies to prevent price spikes, while Saudi Arabia was heard to be offering larger volumes to customers in Asia who have pulled back sharply on Iranian imports. Russian officials have also said they will bring 200,000 b/d of additional product back into the market as production cuts ease.
In the US, the Trump administration is considering a possible release of crude from the Strategic Petroleum Reserve later this year in an attempt to blunt the impact of climbing oil and gasoline prices, according to sources.
The Department of Energy’s Office of Fossil Energy is weighing multiple sizes for the release, but it is unclear what may trigger a release, such as oil or gasoline prices hitting a specific level, sources said.
“We don’t know their specific trigger,” said Kevin Book, managing director with ClearView Energy Partners. “The emergency sale option could be driven by any catalyst at all, but the Administration may want to keep it in their pocket as collateral to sweeten negotiations with Iran’s crude buyers.”
Energy Secretary Rick Perry said last month he would not recommend the US tap its SPR should prices spike after sanctions on Iranian crude are re-imposed in November.
“The Strategic Petroleum Reserve is in place for emergency natural disasters,” Perry told reporters at the World Gas Conference in Washington, DC. “So I would not recommend [tapping it], and I don’t think the President would either.”
The SPR, which has a storage capacity of 713.5 million barrels, held 660 million barrels as of July 6, including 254.6 million barrels of sweet crude and 405.4 million barrels of sour crude, according to DOE.
“The world’s oil consuming nations are showing growing unease about the rapidly tightening global oil market and are considering releasing oil from their strategic petroleum reserves,” Price Futures Group senior analyst Phil Flynn said.” Flynn cited news reports that the International Energy Agency was also considering a release.
“The release of oil from global reserves that some believe are for short term political purposes may lead us down a slippery slope that may backfire in the end,” Flynn said. “Trying to use the oil reserve to try to control prices might prove fruitless because it may not slow growing demand and underinvestment is the main reason for the tightening supply.”
Gartman Letter publisher Denis Gartman saw downside possible in the wider financial market after Friday’s bearish reading from the University of Michigan’s index of consumer sentiment. The index fell to 97.1 in July from 98.2 in June.
Gartman highlighted comments from the University of Michigan’s Richard Curtin, who placed blame on the likely impact of more tariffs on the US economy.
“The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy,” Curtin said.
–James Bambino, [email protected]
–Edited by Jeremy Lovell, [email protected]
Source: S&P Global Platts
