© Stocksak. FILE PHOTO – A crude oil pipeline and a storage tank for oil are seen during a Department of Energy tour at the Strategic Petroleum Reserve in Freeport (Texas), U.S.A, June 9, 2016. REUTERS/Richard Carson
By Stephanie Kelly and Arathy Smasekhar
(Stocksak). U.S. Shale Oil Executive Matt Gallagher took a Twitter poll this week to gauge sentiment towards President Joe Biden’s offer to stock the U.S. Emergency Oil Reserve at prices of $72 a Barrel, in order to give producers an incentive for drilling more.
Nearly 80% of respondents stated that they don’t believe oil futures will fall to a point that would trigger any U.S. buys next year. This negates any boost provided by what analysts call the “U.S. puts” or using proposed Strategic Petroleum Reserve purchase to set a minimum price to produce new oil.
Tricia Curtis CEO of consultancy PetroNerds said, “That announcement was making he appear like he were throwing a bone at the oil industry.” She rejected the offer.
“What if the price of oil falls below that price: Should we just keep our reserves down?” She asked.
Biden “tried to walk a fine balance between supporting his green base while trying to lower fuel prices by releasing the last 180m barrel sale.” Curtis said that he did not do either.
A spokesperson for the U.S. Department of Energy was not immediately available for comment.
Oil is currently selling at $85 per barrel, and the $70 offer “is an offer where there is no supply growth,” stated Abhiram Rajendran (a director at consultancy Energy Intelligence).
U.S. oil prices reached $120 per barrel this year, but did not trigger an increase in production due to labor shortages and high equipment costs, said Hunter Kornfeind (oil market analyst at Rapidan Energy Group).
Rebecca Babin, senior energy trader with CIBC Private Wealth, stated that tight oil supplies have pushed up prices into 2024. She said that this was not due to the SPR offer.
Oil-futures are currently trading at $72 per barrel. This means that oil producers can lock down the future production price at the same level as SPR purchases in the mid- to late 2024, according Kornfeind.
Frank Macchiarola, senior vice president at the trade group American Petroleum Institute, stated that if the Biden administration wants oil supplies to increase, it should “change its policies around producing oil and gas in the United States.”
(By ArathySomasekhar in Bangalore; Stephanie Kelly in New York; writing and editing by Gary McWilliams.