EnergyScan

SPR day ?

Details of a potential US SPR release are emerging, with the announcement expected today. First, it is likely that the announcement will concern multiple countries. We expect China and Japan to respond positively to the US demands. Secondly, there could be between 30 and 60 mb of crude delivered to the market, although this number remains extremely speculative. The lack of clear supply disruption identified for releasing stocks means that the IEA will likely stay away from this announcement. The last coordinated SPR release was during the fallout of the Lybian upstream sector in the wake of the Arab Spring in 2011. Finally, this US SPR release may be done on a swap basis, meaning that the US government will loan barrels and expect them to be returned by the buyers. In short, the SPR will behave as commercial stocks. Given the current backwardation, at 69 cents at the prompt for ICE Brent crude, most private stockholders are reducing their inventories as much as they can in the short term and buying them back at a later date.

Global SPR stockpiles have been dwindling consistently since January 2021 according to Kpler’ satellite tracking tools. Most of the destocking was already happening in China and in OECD Asian countries. Some of these countries, such as South Korea, will likely try to buy the barrels released during this SPR release.

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