The Immediate Changes In Price Of Oil Following The Biden Surge Announcement -- April 4, 2022

The Biden Surge: tracked here.

The release was to begin as of April 1, 2022, a few days ago.Today is pretty much the first real trading day following the launch of the SPR release.

There were seven (?) possible outcomes after the announcement. This does not imply any "cause and effect," and no definitions are provided for "short term" and "long term."

• no effect on price of oil short term or long term -- very, very unlikely
• price comes down in the short term, no change long term -- possible, unlikely
• price comes down in the short term, goes up in the long term -- mostly likely scenario
• price comes down in the short term, goes down in the long term -- very unlikely
• price goes up in the short term; no change long term -- very unlikely
• price goes up in the short term; goes down in the long term -- very, very unlikely
• price goes up in the short term; goes up in the long term -- possibly, very unlikely
  

Politically, the worst outcome: goes up in the short term.

Going up in the short term would have seemed most unlikely.

Today in early morning trading:

• Brent: up 3.47%; up $3.62; trading at $108.00
• WTI: up 4.18%; up $4.08; trading at $103.30
• not only is WTI up (most unexpected) it is up more than Brent percentage-wise and dollar-wise 

I have said on the blog that an SPR release is generally bullish. Algorithms are written in such a way that an SPR release suggests a physical shortage of oil, which, all things being equal, would drive the price of oil higher. 

However, with regard to the Biden Surge, one would have thought it would be different this time because the release was done for reasons other than fundamental / technical reasons. 

So, we will see. The week has just started. 

The Biden Surge -- Why Now? March 30, 2022

The Biden Surge is tracked here. 

Why now, what changed? What prompted the Biden administration to release of one million bopd for an extended period of time and rebates for drivers to cushion the cost of gasoline at the pump?

So far, this is just a rumor, but it "feels real." 

If the Biden administration does announce the Biden Surge, the first question is what prompted that now? 

Obviously, the short answer is the mid-term elections.

Earlier, the administrations said the rise in the price of gasoline a) would be short-lived; b) would not cause all that much pain; c) if it did cause too much pain, folks could buy a Tesla.

My hunch is that the administration can now see that the rising price of gasoline a) will not be short-lived; b) that it will cause a lot of pain for those who plan to vote in November; and, c) the Tesla option is not an option at all. 

So, what changed? 

I'm too tired to go write much tonight, so I will address just one issue.

Everyone will argue if there will be buyers for Russian oil. Of course, there will be. 

But sanctions on Russia are going to get worse, and for the most part have not yet begun to be felt. The fact is that Russian oil production is very much dependent on western technology and western resources. We won't see that impact for several months. But if you thought a shortage of toilet paper was a problem for Americans during the early days of the pandemic, the shortages that Russia begins to experience will make those toilet paper shortages pale in comparison. 

No matter how much one sugar coats it, Russian production is going to fall significantly. And Russia is not like Kashagan or Libya when it comes to temporary losses in production. 

The Biden Surge -- Will One Million Bbls Of "New" Oil Per Day Make A Difference -- March 30, 2022

The Biden Surge is tracked here. 

That's the million-dollar question, or as we used to say, the $64,000-question: will one million bbls of "new" oil per day make a difference?

This takes me back to a "not-ready-for-prime-time" post, February 19, 2018.

Buried in that post is a link to (I suppose it's the most recent) March 8, 2022, EIA short-term energy outlook. That means the analysts took into consideration Putin's War. 

Look at the "World Liquid Fuels Consumption" graphic:

• 2020: 92 million bpd the year of the plague
• 2021: 97 million bopd
• 2022: 101 million bopd
• 2023: 102.5 million bopd

Then look at the "World Crude Oil and Liquid Fuels Production" graphic:

• 2020: 94 million bpd
• 2021: 96 million bopd (demand-supply deficit of one million bpd)
• 2022: 102 million bopd (demand-supply deficit of one million bpd)
• 2023: 102.5 million bopd

Some argue the demand-supply deficit will be much larger. 

Earlier today, it was being argued that global supply is already short three to four million bopd on supply. OPEC+ does not have enough spare capacity to make up the shortfall, even with Iran. 

That "summer of '22" graphic at that link is pretty startling.

At this moment my thoughts: a release of one million bopd from the SPR is a wash. It could have a huge short-term (six months) psychological impact, but long term (one year) it won’t amount to much.

We've had this discussion before. Saudi is not going to let oil get below $80 / bbl, and may in fact move quickly to keep it from dropping below $90 / bbl. I have trouble believing that OPEC+ would react quickly to the Biden Surge but they will be watching closely. 

Bottom line:

• global consumption / global demand: 100 million bpd
• the Biden surge: one million bpd; one percent
• the Keystone XL: in round numbers, one million bopd

The Biden Surge -- Officially Announced March 31, 2022

Updates

April 11, 2022: the SPR release announced by President -- "smoke and mirrors."

April 6, 2022: week 0.

April 5, 2022: jet fuel, east coast, soaring.

April 4, 2022: futures. And, here.

April 3, 2022: futures. Days in storage.

April 2, 2022: commentary. Production: US, Saudi, Russia.

April 2, 2022: the graphic.

April 1, 2022: RBN Energy weighs in. 

March 31, 2022: one big Rube Goldberg debacle. 

March 31, 2022: Day Zero -- the Biden Surge.

March 31, 2022: the Biden administration is in deep trouble. Huge, huge release announced; how much might Americans see in savings at the gas pump? From President Biden himself: "The SPR release could cut anywhere from 10 - 35 cents a gallon, but it depends on how much allies release." The allies can't come close to releasing anything like the US promises to release.

March 31, 2022: it is now being reported that President Biden will release one million barrels of oil from the SPR on a daily basis for the next six month. WTI over night had dropped to $100/bbl (or thereabouts) but is now back up to $103/bbl. We've talked about this before, why a release of SPR oil could have a paradoxical effect on the price of oil.

Original Post 

I assume everyone saw the sell-off of oil today -- March 30, 2022.

The buzz is that the administration will release a million bopd for an extended period of time, and, at the same time, offer rebate coupons to help with high gasoline prices at the pump. 

There are so many story lines here, but we now have a new tag: the Biden Surge, just as we had the Saudi Surge tag when Saudi Arabia, 2014 - 2016, flooded the world with oil in an attempt to "break" (bankrupt) US shale. 

This is the post where updates for the Biden Surge will be tracked.  

Will it make a difference?

• March 31, 2022: unlikely to be enough. Reuters. 
  
• March 30, 2022.

Why now?

• March 30, 2022.

Data points of interest to be followed monthly for the next six months, baseline, March 31, 2022:

• US production of crude oil: 
• baseline: pending
  
• days of supply of US crude oil:
• baseline: 26.6 days; almost four weeks;
  
• amount of distillate in storage -- percent relative to 5-year average:
• baseline: -16.0% (that's a minus sign)
  
• refiners percent of operating capacity:
• baseline: 92.1%
  
• US imports of crude oil,
• US imports from Russia; tracked here.
  
• US exports of crude oil, EIA link:
• baseline, December, 2021: 3.452 million bopd
  
• US exports of finished motor gasoline, EIA link:
• baseline, December, 2021: 941,000 bopd
  
• destination of US crude oil exports; EIA link:
• baseline, December 2021, monthly, in 1000's of bbls: more complete list here; top ten destinations:
  
• Brazil: 11,944
• Canada: 26,436
• China: 14,345
• India: 25,061
• Japan: 18,538
• Korea, South: 18,082
• Mexico: 43,160
• Netherlands: 16,082
• UK: 10,725
• France: 5,766

Political analysis:

• The energy transition is dead. Tracked here. 
  
• ESG is dead, too. Tracked here.