Talk of Coordinated SPR Release Pressures Prices

  1. Highest retail gasoline prices in over seven years for holiday travelers
  2. Discussion of coordinated SPR release
  3. EPA proposes delays in RFS deadlines
  4. Natural gas prices consolidate

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Alan Levine—Chairman, Powerhouse

(202) 333-5380


The Matrix

Motorists traveling this Thanksgiving will be filling up with the highest-priced gasoline in over seven years. While consumers have been feeling the pinch of inflation in everything from groceries to furniture, it is high gasoline prices that grab headlines and give politicians headaches. The Biden administration is talking about “a range of options” to bring down prices, although the tools at its disposal are limited. Yet that talk, along with a resurgence of COVID-19 cases in Europe, moved prices down ahead of one of the busiest travel weeks of the year.

High gasoline prices are problematic for any administration. Prices at the pump have added extra political pressures as inflation threatens the economic recovery. Some interests have called for price gouging investigations while others have suggested the U.S. end the export of crude oil. Neither tactic appears likely to bear fruit. The tool with the most teeth, at least short-term, is to release barrels from the Strategic Petroleum Reserve.

The Strategic Petroleum Reserve was established to be an emergency source of supply. The SPR currently holds approximately 621 million barrels of crude, around one month’s supply. It was not designed to be a mechanism to influence price.

The U.S. is not alone in having a strategic reserve of crude oil. Last week, Reuters reported that the Biden Administration made the unusual request of some of the largest consuming nations, including China, Japan and India, to consider a coordinated release of oil from emergency stockpiles with the express intent of lowering prices. At a recent virtual summit between the U.S. and China, President Biden and Chinese President Xi Jinping discussed the “importance of taking measures to address global energy supplies.”

The talk of a release may prove to be more impactful than the barrels themselves. Historically, any price relief from an SPR release is short-term. In a note to clients, Goldman Sachs said not only is the market now pricing in the release, but it would “create clear upside to our 2022 price forecast (of $85 per barrel Brent Crude).”

Another lever the Administration can pull to calm oil prices is changing the Renewable Fuel Standard. The EPA proposed last week that the deadline for compliance of obligated parties (those that must buy RINs) should been delayed for 2020 and 2021. They also gave small refineries more time to meet their 2019 obligations. RINs prices for ethanol and biodiesel RINs fell on the news, which is bearish for petroleum product prices.

WTI futures prices for December expired right below the 38.2% retracement level. A 50% retracement of the move up in prices from August targets $73.58 as next support.


Supply/Demand Balances

Supply/demand data in the United States for the week ended Nov. 12, 2021, were released by the Energy Information Administration.

Total commercial stocks of petroleum fell 8.9 million barrels during the week ended Nov. 12, 2021.

Commercial crude oil supplies in the United States decreased by 2.1 million barrels from the previous report week to 433 million barrels.

Crude oil inventory changes by PAD District:

PADD 1: Plus 1.0 million barrels to 9.6 million barrels

PADD 2: Plus 2.1 million barrels to 109.5 million barrels

PADD 3: Down 4.9 million barrels to 242.6 million barrels

PADD 4: Plus 0.2 million barrels to 23.7 million barrels

PADD 5: Down 0.6 million barrels to 47.6 million barrels


Cushing, Oklahoma, inventories were up 0.2 million barrels from the previous report week to 26.6 million barrels.

Domestic crude oil production was down 100,000 barrels per day from the previous report week to 11.4 million barrels daily.

Crude oil imports averaged 6.191 million barrels per day, a daily increase of 83,000 barrels. Exports increased 573,000 barrels daily to 3.626 million barrels per day.

Refineries used 87.9% of capacity; 1.2 percentage points higher from the previous report week.

Crude oil inputs to refineries increased 31,000 barrels daily; there were 15.397 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 225,000 barrels daily to 15.940 million barrels daily.

Total petroleum product inventories fell 6.8 million barrels from the previous report week.

Gasoline stocks decreased 0.7 from the previous report week; total stocks are 212 million barrels.

Demand for gasoline declined 18,000 barrels per day to 9.241 million barrels per day.

Total product demand increased 2.34 million barrels daily to 21.629 million barrels per day.

Distillate fuel oil stocks declined 0.8 million barrels from the previous report week; distillate stocks are at 123.7 million barrels. EIA reported national distillate demand at 4.350 million barrels per day during the report week, an increase of 70,000 barrels daily.

Propane stocks decreased 0.2 million barrels from the previous report week; propane stocks are at 74.6 million barrels. The report estimated current demand at 1.194 million barrels per day, an increase of 45,000 barrels daily from the previous report week.


Natural Gas

Natural gas prices consolidated last week around the $5.00 level. Below normal temperatures forecasted for Thanksgiving week gave to support to prices at $4.80. We are entering the time of year where price will be very reactive to short term forecasts. Early indications are that U.S. temperatures will be above normal to start December. Support can be found at $4.60 and $4.20.

According to the EIA:

Working natural gas in storage in the Lower 48 states totaled 3,613 billion cubic feet (Bcf) as of October 31—traditionally considered the end of the natural gas refill season (April 1–October 31), although injections sometimes extend into November. Total inventories as of October 31 were 102 Bcf (3%) less than the five-year (2016–2020) average and 284 Bcf (7%) less than total inventories last year at this time.


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