Update: You cannot make this shit up. Minutes after the biggest weekly crude draw in API history, with gasoline prices at 2023 highs and with wholesales gasoline prices exploding higher (guaranteeing that retail pump pries are set to soar), the Biden administration just gave up on its efforts to refill the Strategic Petroleum Reserve, something we had joked about literally moments earlier.
Just. Perfect. Timing— zerohedge (@zerohedge) August 1, 2023
*US SPURNS ANOTHER ROUND OF OFFERS TO REPLENISH OIL STOCKPILE https://t.co/RV9f9kXC5I
As a reminder, the Biden admin has been drawing down on the SPR for the last 14 weeks and - despite all the promises - has not refilled the "STRATEGIC"
political petroleum reserve one little bit.
So yeah: just 3 weeks after the DOE said it would buy a "whopping" 6 million barrels of sour crude - an amount which the SPR drained every 2 weeks for much of the past year - the Biden administration pulled said offer, an Energy Department spokesperson said on Tuesday, as oil prices are expected to keep rising after a output cut from Saudi Arabia.
The U.S. made the latest solicitation to buy the sour crude oil for the SPR on July 7, and follows the release of a record 180 million barrels from the reserve last year to prevent a Democrat rout in the midterms following Russia's invasion of Ukraine. Having vowed it would refill the SPR eventually, the Energy Department bought back 6.3 million barrels in recent month... and that appears to be it.
The move was not a rejection of oil companies' offers to sell oil to the SPR but a decision made on "market conditions," the spokesperson said. The person not specify what that meant, but tight oil supplies that have caused global oil prices to rise above $80 per barrel in recent weeks. Of course, by refusing to refill now, it only ensures that when the need truly arises, Biden, or rather his successor, will be forced to buy the oil at triple digits.
hey @SecGranholm how's that SPR refill coming? We gonna buy very, very high?— zerohedge (@zerohedge) August 1, 2023
Translation: $65 was too cheap, we'd rather wait until oil is $130 https://t.co/wYlcciUiof— zerohedge (@zerohedge) August 1, 2023
To be sure, the Energy Department headed by the consummately incompetent Jennifer Granholm said that it "remains committed to its replenishment strategy for the SPR" which includes direct purchases, returns of oil that was loaned to companies in the wake of hurricanes and other supply disruptions, and cancellation of planned sales where drawdown is unnecessary, in coordination with Congress.
What it really means is that the only time the SPR can possibly be refilled is when the US economy plunges into a crippling recession when Bidenomics crashes and burns the moment Biden's $1+ trillion stimmy no longer flies.
Oil prices are expected to surge in coming months after Saudi Arabia said it would cut output by 1 million barrels per day starting in July, on top of other cuts from eight OPEC+ countries announced in April. Banks such a Goldman predict that oil is facing a deficit of as much as 2mmb/d in the next two months, practically assuring triple digit oil returns in weeks if not days, and forces the Fed to hike much more.
Meanwhile, the in a gift to refiners, the 3-2-1 crack spread is blowing out.
As a reminder, when one product spread is blowing out, the market is saying that there needs to be more output of said product. When all spreads are blowing out simultaneously, that may be the market's way of signaling it needs more refining capacity to satisfy growing product demand.
We are seeing more of the latter (as Jet Fuel and Diesel cracks are also blowing out).
* * *
Oil prices gave back some of the recent solid gains today despite OPEC’s crude production tumbled by the most in three years as Saudi Arabia implemented a deeper cutback in a bid to shore up global markets, as dollar strength weighed on crude prices (and weak PMIs threatened demand outlooks).
"The OPEC+ Joint Ministerial Monitoring Committee will meet online on Friday, providing Saudi Arabia an excellent opportunity to roll its voluntary 1 million bpd production cut announced on June 3 for July production for another month to September. It would be the second time the Saudis have extended the voluntary 1 million bpd production cut. There is speculation that another 1 million roll forward could slow the global war on inflation, and kill the "golden goose," especially heading into the end of summer driving season, and the beginning of shoulder season," Robert Yawger, executive director of energy futures at Mizuho Securities USA, wrote in a Monday note.
Volumes also remain muted in light summer trading, while volatility is at the lowest since January 2020.
Expectations were for more inventory draws after last week's across-the-board drop...
Crude -15.4mm (-1.3mm exp) - biggest weekly draw on record
Gasoline -1.68mm (-1.3mm exp)
Distillates -512k (-100k exp)
Umm... API reports that Crude stocks fell 15.4mm barrels last week (yes 15.4!!!) - over 10x expectations. Product inventories also fell as did stocks at the Cushing Hub.
If that holds for the official data released tomorrow that will be the biggest weekly draw in the data's history (back to 1982)
WTI was hovering around $81.60 ahead of the API report (well off the day's lows) and bounced on the massive draw into the green for the day, back above $82...
Back up to 2023 highs...
"Oil remains one of the most attractive trades and buyers will likely emerge on every dip," said Edward Moya, senior market analyst at Oanda,in a note.
Shit's about to get real for Mr. Biden...
Unleash the SPR again?
he's back pic.twitter.com/5CtEVpiExl— zerohedge (@zerohedge) August 1, 2023