Thread by @anasalhajji

Thread on the impact of the #SPR releases/end on oil prices
#Oil #OOTT #COM
1-9 At first, they prevented prices from increasing. Since the demand was not rising proportionally to the increase in supplies, prices started declining, especially since the releases replaced imports

2-9 As a result, the "demand" for the SPR started declining & will continue to decline gradually until it stops, probably before the whole amount is sold!
In other words, it remains to be seen if the whole amount is sold. If it does, it is mostly because #Crude_Quality_Matters

3-9 Therefore, the idea of an abrupt stop and loss of about 800 kbd may not happen, and therefore, the idea that oil prices will rise sharply as a result of ending withdrawals may not happen. Being bullish based on the idea of an abrupt loss of 800 kbd is a dangerous strategy.

4-9 The substitution between the SPR and commercial inventories is happening before our eyes as commercial inventories are rising at a time when they usually decline. Also, watch Chinese SPR withdrwals.

5-9 I believe the government will not start refilling the SPR until WTI prices decline below $53/b. Even then, it will be a partial refill and most likely it will be medium sour crude. This does not help shale producers nor Canadian producers. Why $53? 😉

6-9 Since the refill is going to be partial (My guess: 60-90 mb) and in a period of declining oil prices, the impact on oil prices is minuscule.
Absent a severe recession, there is no reason for oil prices to decline below $60. Refill, if ever happens, might be years from now.

7-9 Linking the SPR refill to financial markets is a joke. Will discuss the details in a Space soon to show how it doesn't work in economics, finance, and politics. The idea that guaranteeing a minimum price to refill will support domestic production is another joke.

#SPR

8-9 The question is: what will happen during severe hurricanes in the Gulf of Mexico?
a- Release additional amounts as loans?
b- Since sales are declining, sell more? (do nothing in a sense)
c- Make additional sales above 180 mb? (less likley)
#SPR #Oil

9-9 In short, the withdrawal from the SPR was an additional supply that prevented oil prices from rising and later lowered prices. There was nothing bullish about it. The impact was large because the amount was huge. In case of hurricanes, let us wait and see.

Here is the evidence on the above tweet. Demand is declining
The cumulative withdrawal so far since the start of the year is 132.226 mb. Once everything is said & done, the US will have about 400 mb in the SPR, enough for multiple back-to-back emergencies. #Oil #OOTT #COM #SPR

9+
Choose one!
#SPR #Oil #OOTT #COM