US Energy Secretary’s Comments About SPR Put Pressure on Prices
March 24, 2023
The energy markets were under selling pressure yesterday on comments made by US Energy Secretary Jennifer Granholm, who stated that it would be difficult to take advantage of the current low oil prices for the US Strategic Petroleum Reserve this year. Last year, 180 million barrels had been sold from the SPR into the market to help lower prices. Granholm said the administration has a target of $72 or lower, but that the sale and maintenance of 2 of 4 reserves will make it difficult to buy back oil this year. The crude oil market did have a floor at $70 as traders thought they would see buying around this level, but Granholm’s comments essentially removed this floor. She said it may take years to refill the reserve. In addition, the DOE is moving forward with the sale of 26 million barrels of oil from the SPR to be delivered between April 1 and June 20th, which is typically scheduled annually. The SPR is at its lowest level since 1983.
Goldman Sachs said oil demand is surging in China, the world’s largest oil importer topping 16 million bpd. This is supportive to Goldman’s bullish outlook. Goldman Sachs analysts also said the US banking failures would hit supply harder than demand also supportive to prices in their outlook.
Eurozone manufacturers have reported a widespread decline in business activity so far in March, the ninth consecutive monthly decline since July 2022.
Concerns are still out there rumbling around about the banking sector. Share prices of European lenders are down significantly, with Deutsche Bank more than 13% lower. This has rallied the US dollar today and that is a headwind for energy prices.