Efforts to Fill SPR Slowed
November 28, 2023
The energy markets are waiting for OPEC+, and what their decision will be on production moving forward. The meeting got pushed back until this Thursday as reports indicated there was some disagreements between members. Saudi Arabia the de facto leader of the group has been pushing for additional cuts. If they do get these cuts the market will trade higher. At this point in time the market sentiment is that OPEC+ will leave current production cuts in place.
The estimate for this week’s inventory report is looking for a draw to crude oil inventories and that is offering some support to prices. Crude inventories have seen builds in the last three weeks and that has helped to put some selling pressure on crude prices.
Bloomberg reported that efforts to fill the SPR are being slowed in part by companies delaying their return of borrowed barrels. Shell Plc, TotalEnergies and Chevron Corp were among nine companies that borrowed government oil as part of an exchange program in the past two years. According to government documents seen by Bloomberg, the three companies received US approval to delay about 5 million barrels until 2024 and 2025. So far, the US has purchased only 7.5 million of the 12 million barrels it planned to purchase this year.
As reported by Bloomberg. A gallon of gasoline now cost $3.25 on average, more than 60 cents below the year’s peak in mid-September and about 30 cents cheaper than this time last year, according to data from the America Automobile Association.
The following is from John Kemp. Oil traders anticipate the market will be comfortably supplied during the first three months of 2024 even if Saudi Arabia and its OPEC partners extend their current production cuts as is widely expected. If extra cuts by Saudi Arabia and Russia announced in the summer of 2023 were to end as scheduled at the end of 2023, the market would experience significant over production, inventory accumulation and prices would fall sharply. If Saudi Arabia want to push price higher, it will have to cut output again and or persuade other partners to join in the cutting their own production.