Trump clears release of US oil reserves after supply breakdown in Saudi Arabia

WASHINGTON: US President Donald Trump has authorized the release of oil from the country's emergency oil reserves following a series of drone attacks in Saudi Arabia that destroyed half of the kingdom's gross output, or about 5 percent of the country's oil reserves. global supply.

In tweets, the president said the amount of oil released would be determined "enough so that markets remain well supplied."

Saturday's attacks on Saudi Arabia rocked the oil markets, with Brent crude rising by $ 11.73 a barrel, the biggest jump in a day to $ 71.95 before falling back to $ 67.79 per barrel at 6.14 hours in Singapore. .

Secretary of Energy Rick Perry has ordered officials to work with the International Energy Agency on possible options for coordinated action, according to a Saturday statement.

The use of strategic oil reserves, the largest reserve of emergency crude in the world, will depend on the speed with which the Saudis can resume production of the world's largest crude processing facility.

Set up after the Arab oil embargo in the 1970s, stocks skyrocketed, the stock has already been exploited in response to Operation Desert Storm's 1991 Hurricane Katrina in 2005 and the supply disruptions in Libya in 2011.

"As long as a damage assessment is not available, it is not possible to obtain a high confidence rating for the likelihood of its exploitation," said Bob McNally, former energy advisor to President George W. Bush and chairman of the consulting firm Rapidan Energy Group.

"For now, the administration reassures the market on the fact that the United States and other IEA emergency storage partners are ready to act."

McNally said being open to an SPR publication would have an impact.

"The oil markets, focused solely on trade wars and macroeconomic concerns, involve virtually no geopolitical risk," said Joe McMonigle, senior energy analyst at Hedgeye Risk Management LLC.

"An RSP publication, particularly if it is coordinated with IEA action, would mitigate some of the soaring oil prices, but would also depend on current and high geopolitical risk."

Salt caverns

The emergency stock is stored in huge underground salt caverns along the US Gulf Coast.

Although originally created to cope with future shocks in supply, the Reserve has more recently become the Congressional reference money-box used to fund everything from roads to drugs to reducing deficit.

About 10 million barrels were sold in the last of a series of sales imposed by Congress last week.

Trump proposed to sell half of the emergency stock in its 2017 budget request.

His administration argued that "because of the record oil production in the country, it was useless to keep such an important reserve.

But the "potential long-term disruption of critical oil facilities," such as the 5 million barrel-a-day treatment facility at Abqaiq affected Saturday, "is exactly the type of risk that the strategic reserve of oil has been designed to mitigate, "said McNally.