BAKU, Azerbaijan, April 4. The impact of the most recent oil release by the US will be greater than in November 2021 and early March 2022, Trend reports with reference to Fitch Solutions.
“On March 31, President Biden has announced that the US will release 180mn bb from the Strategic Petroleum Reserve over the course of the next 6 months in order to curb the oil price surge that supports new highs in retail fuel prices. The announced release comes after two recent releases - one from November 24 2021 (50mn bbl) and from March 1 2022 (30mn bbl as a part of a 60mn bbl release coordinated by EIA). We note that the impact of the November release, was rather temporary with Brent prices falling from USD82/bbl on November 25 to USD73/bbl on November 26 2021. Prices recovered to levels above USD80/bbl in the week of January 3 2022. In the immediate aftermath of the emergency release announcement on March 31; WTI, Brent and gasoline (RBOB) benchmark prices declined by respectively 7.2 percent, 5.4 percent and 4.1 percent in relation to the close price from March 30,” reads a report released by Fitch Solutions.
The company believes that the additional supply from US and partners' reserves will likely narrow the gap of missing Russian barrels in 2022, however, could prove insufficient to balance the market.
“The current release is much bigger in size as compared to the two recent ones, with the Administration planning on releasing 180mn bbl over the next 6 months as opposed to 50mn bbl over 5 months (December 2021-April 2022) and 30mn bbl over an unspecified timeframe. We note however, that the full impact will likely be seen once the market learns about the full size of the potential release from other partnering countries as President Biden indicated that the release from SPR will likely be accompanied by the additional barrels from strategic reserves of other key partners which could lead to well over 1mn b/d of additional supply over the near term,” the report says.
The International Energy Agency has called for an extraordinary meeting on April 1, which could shed some light on decisions from other members. Some media reports indicate that partnering countries could release 30-50mn bbl of crude oil.
“On the other hand, we do not expect OPEC+ to diverge from its initial production plan. Thus, releases from strategic reserves of the US and partner countries will be one of the key tools, next to an increase in domestic production, to provide additional crude oil supply and outbalance missing barrels from Russia. As of now, we maintain our view that Russia will see a decline of almost 1mn b/d of production over 2022 as compared to 2021, which marks a decline in expected output of approx. 1.6mn b/d from our initial 2022 forecast, with risks tilted to the downside. Without final release commitments and confirmed timeframes from other partners, it remains challenging to assess the full impact of the releases from strategic reserves,” said Fitch Solutions.
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