1. biggest problem with releasing from US SPR is the crude is in the wrong place for refineries in the short term.
First, It will take 2 weeks for the first SPR crude to hit the market after Trump permitted its release.
#OOTT
First, It will take 2 weeks for the first SPR crude to hit the market after Trump permitted its release.
#OOTT
2. The second: most similar crude from other producers will already have been allocated making it difficult to cover any short fall in Saudi crude until the November programs.
3. Third Literally if you look at a map Saudi Arabia is right in the centre of oil logistics. The US is not. it is at the extreme. For a importing country it is not a big problem but as a producer it is a problem being at the extreme.
4. The US is expecting to release up to 4.4mbpd from the SPR but the US only imports about 400kbpd from Saudi and 1mbpd from other OPeC producers. That means other regions will be hit by a 50% drop in Saudi exports if they continue for long.
5. Asia will be the big loser. For the US to get its crude to Asia to fill the loss, it will take an extra month of sailing time than from Saudi. That means that trump permitting release of crude today reaches Asia in about 10 weeks, 6 weeks later than Saudi crude produced today
6. Therefore, Asian refiners won’t see any benefit in the short term from the US release. Increase in Oil prices for a refiner are only a cash flow and credit line problem rather than a profit problem as refinery margins typically remain.
7. The only other oil available is probably Urals due to refinery maintenance but that has the same freight problems as US crude in the short term. So the only crude to cover if Saudi exports fall is 1mb of ME spare capacity. India and China will need to draw down inventories
8. Last question will be with reduced Saudi production, will they keep their own Saudi refineries running at full blast?
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