Even Carpe Diem Confused About Tapping the Strategic Petroleum Reserve

Link here.

Gasoline prices have been dropping steadily for the last six weeks, and the current price of $3.62 per gallon (national average) is the lowest in three months and almost 8% below the recent peak of close to $4 per gallon in early May (see chart above).  America's  stock of crude oil for the week ending June 17 was at the highest level (1.065 billion barrels) in more than four month since early February.  So what's the administration's "solution" to the "non-problems" of rising oil supplies and falling oil and gas prices?

Tap into America's "Strategic Petroleum Reserve" for 30 million barrels of oil, enough for about 36 hours of domestic consumption, while at the same time opposing any legislation that would allow greater access to domestic oil supplies.

It looks like everyone is confused. 

"Big Oil" May Not Request Oil From Reserves --- They Probably Don't Need It -- More on the Release of Oil From the Reserves

The devil is in the details. Link here.

Just because governments around the world say they are going to release oil from their strategic petroleum reserves, it doesn't mean that they will actually deliver any oil from their reserves:

Karen Matusic, a spokeswoman for ExxonMobil, the world’s biggest oil refiner, declined to comment on whether the company plans to request any supplies from the strategic reserve. Chevron and Shell also declined through spokesmen to discuss their crude needs or attitudes toward the availability of strategic stockpiles. 

And then this:

Storage tanks used by oil producers at the crude-trading hub in Cushing, Oklahoma, held 38 million barrels as of June 17, 41 percent above the five-year average for this time of year, according to Energy Department figures. Stockpiles at Cushing reached 41.9 million barrels in April, 2011, the highest point since at least 2004, when the Energy Department began tracking the figures. 

U.S. crude imports are almost 10 percent lower than a year ago. Refiners brought 9.15 million barrels a day of oil into U.S. ports last week, down 9.5 percent from the same week in 2010, according to Energy Department data. Demand for foreign crude in the world’s largest economy dipped to a 24-month low of 7.69 million barrels a day in December.

“This action today will do nothing to benefit consumers,” Charles Drevna, president of the National Petrochemical & Refiners Association, said in a statement. “Instead, it leaves our nation vulnerable if hurricanes, other natural disasters or a foreign crisis causes a real supply shortage.” 

Interesting, very interesting.

The 60-million-barrel release is scheduled for the next 30 days. I assume all oil that is being delivered over the next 30 days is already contracted. Much of this oil is already in storage containers and much of it is slogging its way across the oceans. This whole announcement seems really, really bizarre.

It will be interesting to see how much oil is actually requested; I wonder if the administration will provide that figure.

IEA, Bloomberg, Others: Saudi Not Able to Make Up Shortfall

Earlier today, in response to the news that 60 million bbls of oil was going to be released from worldwide strategic reserves, I wrote that that world was awash in oil. That was earlier to day.

Now, I see there is an article from Bloomberg that confirms what I wrote:

The supply addition comes at a time when refiners in the world’s biggest economy have more crude on hand and are importing less as demand for fuels such as gasoline and diesel is slipping, according to Energy Department figures. The National Petrochemical and Refiner’s Association criticized the decision to tap the strategic reserve as a political move that “makes no sense” and “will do nothing to benefit consumers.” 

The story continues:

“This is kind of a head-scratcher because we’re just not in a situation in the U.S. where we physically need more barrels to meet demand,” Blake Fernandez, an energy analyst at Howard Weil, said in a telephone interview. “This looks more like a perception move by the U.S. government and the Europeans to alleviate high crude prices.”

Earlier today:

The U.S. and 27 other nations pledged today to tap government-controlled oil inventories after civil war in Libya disrupted crude shipments and Saudi Arabia failed to persuade fellow members of the Organization of Petroleum Exporting Countries to plug the gap with increased output.

In other words, Saudi is NOT able to make up the shortfall, something I have said more than once in the past year.

This is the third release from strategic reserves. The first two were more like "real" emergencies.

IEA members have conducted coordinated releases of emergency stockpiles on two other occasions since the group was founded in 1974. The first was during the 1991 Persian Gulf War; the second was in the aftermath of Hurricane Katrina which slammed into U.S. refineries and offshore oil platforms in 2005.

Midcontinent Storage On Pace to Increase 60 Percent Within Five Years -- Due to Bakken

Link here.

BENTEK Energy reports that crude oil production in the U.S. PADD 2 (Midcon) region is on pace to increase 60 percent over the next five years, with continued Bakken drilling activity and emerging oil plays in Oklahoma expected to push oil production in PADD 2 to 1.4 million b/d by 2016.

The Montana and North Dakota Bakken will contribute 418,000 b/d over the five-year period, while the continued development of conventional resources in PADD 2, especially in Oklahoma, contributing 90,000 b/d to the total growth. "This rapid increase in oil production is expected to put additional pressure on the already constrained Cushing market," BENTEK noted.

PADD 2 is home to some of the hottest unconventional oil and rich-gas plays in the U.S. Besides the Bakken, PADD 2 is home to several Oklahoma plays, including the Granite Wash, Cleveland Sandstone, Tonkawa, Cana Woodford, Arkoma Woodford and Mississippi Lime plays.

Headline Story -- Rigzone: North Dakota Booms Into Energy-Rich Era

Link here.

Due to rich petro-resources, some believe that North Dakota is on the way to surpassing even Alaska to become the second largest oil and gas producing state in the nation after Texas, reported the Anchorage Daily News in January.

And it's happening fast.

North Dakota is already the nation's fourth largest oil and gas producing state; California is third.

Exploitation of the Bakken and Three Forks oil shale formations and adjacent Sanish area are sparking a big boom in petro-production in this Great Plains state.

There's nothing in the article "we" didn't already know but it's exciting to see the headline story in Rigzone.com.