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As gasoline prices rise and mid-term elections loom in a few months, President Donald Trump would consider releasing crude oil from the strategic oil reserve of 660 million barrels – a decision that will certainly provoke strong political criticism. All, the reserve is intended to be exploited in emergency situations, such as war or natural disaster. This was the case in previous levies in 1991, 2005 and 2011, as noted by the Wall Street Journal, while an exchange made in the fall of 2000 by the Clinton administration was criticized by George W. Bush
. way, stimulate the supply of crude oil to domestic refiners and perhaps put a brake on prices at the pump. In a note on Monday, Michael Tran, commodities strategist at RBC Capital, has asked for additional cooperation from Saudi Arabia.
Not "More Barrels"
Now, the Saudis, as well as other major producers, have already moved to pump more oil. Do not try to do more on this front, says Tran. "While the Saudis will not deliver more barrels than the market needs, an alternative to a US-led SPR exit is that the Kingdom signals Trump that these volumes have gone up." The Organization oil-exporting countries, which is effectively led by Saudi Arabia, and other major producers, led by Russia, agreed in June to revive overall oil production but remain within production limits that they have previously agreed. These brakes, reinforced by supply failures in Venezuela and Libya, have been credited to help eliminate a global overabundance of supply.
And then, of course, there is the expected blow to Iranian exports following Trump's decision to fire the United States out of the Iranian nuclear deal and reimpose sanctions on the country, which leaves Trump with "the mutually exclusive situation of carrying out his hawkish foreign policy agenda while wanting to lower retail fuel prices for his home base".
The decision of OPEC and its allies to increase production was taken following criticism from Trump, who claimed that producers were pushing up oil prices. Trump continues to criticize the OPEC via Twitter as oil prices pick up steam this summer
RBC Capital Markets
It's Where the Barrels Go
Tran says that Saudi oil exports to the United States 1 million barrels a day, but in 2018 tend to less than 800,000 barrels a day (see graph above). Finding an agreement to send more barrels to the Gulf Coast would be a win-win. He explained:
| This would give the President an optical victory, curb the storms tweet, and allow the Kingdom to regain control of the accelerator rather than leaving it in the hands of a president actively seeking to unravel the achievements accomplished by OPEC. the last 18 months. In other words, the increase in exports to the Gulf could create a physical impact similar to that of an SPR exit without scare a market that has become clbadically conditioned to fear even minor changes in the markets. figures of Saudi production. |
The national average price of gasoline rose 2 cents last week to $ 2.86 a gallon, according to AAA, reflecting a surge in gasoline demand in the middle of the summer season. This might not seem particularly painful. It is down 1 cent from last month but is up 55 cents from last year, noted AAA
Oil futures have edged down from the highs of 3 years and a half. compared to a year ago. September West Texas Intermediate Gross
CLU8, + 1.83%
on the New York Mercantile Exchange were up $ 1.36, or 2%, Monday at $ 70.05 a barrel. WTI futures are up 16% since the beginning of the year and nearly 41% in the last 12 months.
Brent Brent
LCOU8, + 0.73%
the global benchmark, rose 1% to $ 75.50 a barrel and rebounded 12.9% in 2018 and up close 44% in the last 12 months. September futures on gasoline
RBU8, -0.10%
increased 0.2% Monday to $ 2.1175 per gallon. Gasoline futures have risen nearly 18% since the beginning of the year and have gained more than 40% over the past year.
But does not exclude the SPR
Meanwhile, Tran told investors an SPR version as a real possibility. And while this would likely help lower prices in the near term, "many have suggested that such an event would be a catalyst for growth."
Gasoline prices are very seasonal, so "he could opt for victory with a SPR exit while the peak season in the United States ends and begins in the fall "But if intermediate terms come and go without a release of SPR and retail fuel prices fall due to seasonal factors, lower oil prices will be less of a political priority for the country." The release of SPR or the end of the mid-term elections for oil prices to rise, whichever comes first, "he said.
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