The Daily Update: Biden Opens The Taps

After weeks of speculation, Joe Biden confirmed that the US will release 50 million barrels of crude from its Strategic Petroleum Reserve (SPR) in coordinated effort with Japan, China, South Korea, India, South Korea and even the U.K. in a combined attempt to ease the pressure of global oil prices. In total, the U.S. will release 50 million barrels from the SPR. Of that total 32 million barrels will be an exchange over the next several months, while 18 million barrels will be an acceleration of a previously authorised sale. ‘The President stands ready to take additional action, if needed, and is prepared to use his full authority working in coordination with the rest of the world to maintain adequate supply as we exit the pandemic’ the White House said in a statement. For context BP earlier this month said global oil demand was back above 100 million barrels a day.

The move comes after OPEC+ repeatedly spurned global calls to significantly boost output in the face of rising energy prices. Indeed, the Biden administration had warned the Saudis for weeks that the US would find alternative solutions if the price of crude oil topped $85 a barrel, officials said. However, as we have said before, after years of hearing the ongoing global calls from all quarters to stop new investments in oil companies and producers along with being side-lined in the rush to cut emissions by large industrial economies, it's hardly surprising they are not ready to play ball. The way OPEC sees it, higher oil prices are essential to continued investment, along with reminding the world that it still needs them. Add into the mix the concern that sanctions on Iran being rolled back allowing the country to ramp up its oil production and compete with OPEC+, you can see the unease. Now all eyes will turn to the OPEC+ meeting on December 2nd, and the response.

The decision had been expected by oil traders for at least the last couple of weeks. Oil prices had already spent much of November under pressure in anticipation of an SPR release. The formal announcement had a buy the fact effect, with West Texas rallying $3.5 to trade close to $79.

The Strategic Petroleum Reserve was established as a national energy safety net after the oil crisis of the 1970s.The oil is stored in four massive underground salt caverns along the Louisiana and Texas coasts. The sites currently hold over 600 million barrels of crude oil, the largest emergency supply on the planet. The reserve is capable of supplying all of the U.S.'s consumption needs for approximately one month.

Off to listen to the new Adele song again. Every time I turn the radio on, its playing, 90 min specials on TV, I can’t get enough of it. Really looking forward to her next breakup song.