The US Strategic Petroleum Reserve (SPR) has fallen to its lowest level in nearly 44 years. The reserve held 285.4 million barrels of crude oil in the week ending September 4, the lowest level since November 1982, according to data from the US Energy Information Administration (EIA).
Tensions between the US and Iran are also adding pressure to oil markets. The end of the ceasefire has added another source of uncertainty for oil supplies. With no permanent US-Iran agreement, concerns over the wider Middle East have added upward pressure to crude prices.
WTI crossing $100 was especially significant for the US market. US crude had not traded above $100 a barrel since May. A 60-day ceasefire between the US and Iran expired in August without a permanent agreement.
The fall is linked to a major US decision to release oil from the reserve. The SPR is now much lower even as oil prices are climbing. The reserve’s decline comes at a time when crude prices have moved sharply higher, raising concerns about how much emergency oil the US has available if global supplies face another major disruption. US commercial oil inventories have also fallen, although they are not at an unusually low level. Commercial crude stocks are still around the normal level for this time of year. US crude prices were already significantly higher at the start of September. Oil is also much more expensive than it was a year ago. Higher crude prices are also showing up at US gas stations. The disruption pushed both major US and global crude benchmarks above key levels. The US is still processing a very large amount of crude at its refineries. Refinery processing increased from the previous week. US refineries were operating close to full capacity. The US also imported more crude during the week. The key concern is the combination of a much smaller emergency reserve and rising oil prices. The Strategic Petroleum Reserve is meant to provide emergency oil supplies when major disruptions threaten the US energy market. For now, the fall in the SPR does not mean the US is running out of oil.
The reserve lost another 1.2 million barrels in just one week. SPR stocks fell from 286.6 million barrels in the previous week to 285.4 million barrels by September 4. The reserve held 405.2 million barrels a year earlier. That means the US has lost almost 120 million barrels, or around 30% of its stock, in just 12 months, according to the EIA data. The US had committed to drawing down 172 million barrels from the Strategic Petroleum Reserve, according to Reuters. Commercial crude inventories, which do not include the Strategic Petroleum Reserve, fell by 400,000 barrels during the week ending September 4 to 424.1 million barrels, according to the EIA. The 424.1 million barrels were roughly in line with the five-year average, according to the EIA. West Texas Intermediate (WTI) crude was priced at $92.69 a barrel on September 4. WTI jumped more than $8 in just one week. The September 4 price was $8.12 higher than the previous week’s level. WTI was $30.47 a barrel higher on September 4 than its price a year earlier, according to the EIA. The national average price for regular gasoline reached $4.157 per gallon on September 7. The national average increased by 8.6 cents from the previous week and was 96.5 cents higher than a year earlier, according to the EIA. Brent crude futures moved above $108 a barrel, while WTI futures rose above $103 a barrel. American refineries processed 17.6 million barrels of crude per day during the week ending September 4. The figure was 91,000 barrels per day higher than the previous week’s level. Refinery capacity utilisation stood at 97.8% during the week ending September 4. Crude oil imports increased by 53,000 barrels per day, reaching 6.8 million barrels per day. With stocks now around 285 million barrels, the US has significantly less oil stored in the reserve than it did a year ago. Commercial inventories remain close to their five-year average, while US refineries continue to process nearly 17.6 million barrels of crude a day.
Because of a major supply concern in Saudi Arabia, oil prices surged further this week. Because of growing supply and geopolitical risks, the SPR has fallen to its lowest level since 1982, while crude prices have surged. Because oil prices are rising at the same time that the emergency reserve is at a 44-year low, but the timing is important. Any major disruption to global oil supplies could therefore put additional pressure on crude prices and US gasoline prices.
Saudi Arabia shut down its East-West pipeline after drone attacks, pushing global oil prices higher, according to Quartz.
The drop is much bigger when compared with last year. Gasoline prices rose sharply over both the previous week and last year.
