Benzinga - by Neil Dennis, Benzinga Staff Writer.
The Biden administration has been slowly replenishing stocks in the Strategic Petroleum Reserve (SPR) as oil prices fell in the fourth quarter, buying crude at prices that could rate the president as an oil trading legend.
The SPR is an emergency stash of crude oil — the world’s largest — that was created to ease oil supply problems or shortages. It was created in 1975 following the Arab oil embargo that saw crude and gasoline prices spike, and caused damage to the economy.
Back in 2022, in response to a price spike after Russia invaded Ukraine, President Biden ordered the release of 180 million barrels from the SRP to calm the market, bringing the price of Nymex WTI crude back from a highs well above $100 a barrel, to below $80.
It helped also to bring gasoline prices at the pump lower during a period when inflation was nearing its July 2022 peak of 9.1%. The Biden administration was using oil as a monetary tool.
Also Read: Biden The Master Oil Trader? Crude Drops Below $80 And US Government May Earn Windfall On Emergency Reserve
Careful Replenishing
Department of EnergyIn October 2023, the price of WTI climbed to a high of $95. It then embarked on a two-month decline brought about by slowing demand fears as measures of economic activity pointed to a easing in growth.
As prices fell below $80 a barrel in November and December, the government slowly started buying oil to replenish SPR stocks.
Thursday’s Energy Department statement said the administration has bought back 20.13 million barrels of domestically produced crude at an average price of $76.12. It recalled nearly 4 million barrels of crude on loan to oil companies. They’re expected to arrive back at the SPR this month.
The DOE also said it was issuing a new solicitation for up to 3 million barrels to replenish the reserve further.
Biden The Oil Trader
However, it can’t be judged to have been a total success until all 180 million barrels have been recovered. Much could happen to long-term price expectations over the five years the administration set for complete recovery — geopolitically and domestically.
Biden may not secure a second presidential term, and a new president could decide the SPR needs replenishing more quickly. Larger and more regular purchases could drive crude prices higher, which would raise the cost of replenishment.
On Friday, oil prices were lower, with WTI down 2.3% at $72.22 a barrel, while the United States Oil Fund (NYSE:USO) an exchange-traded fund that tracks the price of light-sweet crude, fell 2% to $67.69. The Energy Select Sector SPDR (NYSE:XLE), which tracks the performance of U.S. oil companies, was up 0.7%.
Now Read: Biden The Master Oil Trader Part Deux? Crude Prices Plummet. Is A Government Windfall Coming?
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