Renewed SPR Sales Slash US Crude Stocks, New Data Signals Stronger Global Crude Demand

After just twelve weeks of halted sales from the US’s strategic petroleum reserve (SPR), government supplies are once again falling in the wake of OPEC+’s latest round of aggressive output curbs. In late 2022, the Department of Energy said the US would soon look to re-fill the depleted stockpile, which has now fallen to a near 40-year low, but such plans never came to fruition and look even further off now that prices are on the rise and supply appears likely to tighten in months to come.

The White House’s public reaction to the OPEC+ cuts has been subdued, which could signal that US officials are content keeping prices around current levels since they should continue to have a deflationary impact on broader price gauges. The energy component of the CPI, for instance, posted a -6.4% YoY downturn in March, its first annual decline since January 2021. 

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The US’s Strategic Petroleum Reserve (SPR), which used to be as large as 656.1 million barrels of crude oil in 2020, has now been whittled down to its thinnest level since November 1983 at less than 369.6 million barrels. Yesterday’s Petroleum Status Report from the Energy Information Administration (EIA) showed a second consecutive draw from the government stockpile, bringing the combined total of commercial stocks of crude and the SPR to a 10-week low in the week to April 7. The majority of the SPR’s decline in the 2022 was related to an unprecedented emergency sale of 180 million barrels, which wrapped up around the start of the new year. In some weeks during that period, the US was dumping more than 8.0 million barrels of SPR crude onto the market to douse flaming hot oil markets.

It took the US just 12 weeks to return to SPR sales of crude oil, with no sign of plans to re-fill the US’s thinning emergency stockpile in sight. As MRP has previously noted, the White House and Department of Energy (DoE) signaled late last year that they’d prepare to initiate a re-filling of the SPR with fixed-price contracts around $70.00 per barrel, but sub-$70 price tags on US benchmark WTI crude came and went with no sign that meaningful SPR purchases were ever on deck. The Biden administration did at one point announce that they’d be taking bids for a February 2023 delivery worth 3 million barrels of oil, but the DoE subsequently rejected all offers to fill the order and told Reuters it would not be “making any award selections for the February delivery window.”

That backpedaling was followed by radio silence on the SPR for several weeks, and then…