US sells 10 million barrels of SPR crude, little scope seen for further large sales

Quantum Commodity Intelligence - Eight energy companies have bought 10.15 million barrels in the latest crude oil sale from the US Strategic Petroleum Reserve as part of President Biden's sale of up to 180 million barrels over what will likely be a seven-month period.

Refiner Marathon Petroleum was the largest buyer in the latest sale of emergency stocks, picking up 2.35 million barrels, followed by Equinor and Motiva.

Crude oil deliveries will take place from the West Hackberry and the Big Hill SPR storage sites from November 1, 2022, until November 30, 2022.

In addition to the 10.15 million barrels of crude oil awarded for November delivery, 155 million barrels have already been delivered due to the Administration's historic use of the SPR, noted the Department of Energy.

The DOE said the release was "to address the significant global supply disruption caused by Putin's war on Ukraine, act as a wartime bridge for domestic production to increase, and aid in lowering energy costs for American families."

Further sales

Last week's OPEC+ announcement that it will cut output by a headline 2 million bpd from November prompted speculation that the DOE could authorise further large-scale sales from government storage. 

However, strategists led by Helima Croft at RBC Capital Markets said that while the US signalled further SPR releases were in the offing, they were unlikely to see another blockbuster release in the near term.

"A more clear risk, in our view, is the introduction of US product export restrictions in a rising retail gasoline price environment," RBC said.

US emergency oil stocks at the start of October were at the lowest level since 1984, with just 416.4 million barrels last week.

While the President can technically authorise further SPR drawdowns, there will be a limit, given that the International Energy Agency (IEA) has a minimum stockholding obligation for participating members.

RBC Capital Markets previously pegged that number for the US at roughly 315 million barrels, while the DOE will eventually have to replenish the SPR by the same amount it drew this year, increasing future oil demand.

Awarded SPR contracts for November 2022 loading:

1. Atlantic (0.5 million barrels)
2. Equinor (2.05 million barrels)
3. Macquarie (0.9 million barrels)
4. Marathon (2.35 million barrels)
5. Motiva (1.75 million barrels)
6. Phillips 66 Company (1.4 million barrels)
7. Shell (0.7 million barrels)
8. Valero (0.5 million barrels)