Many observers predicted that if President Joe Biden announced intentions to release up to 50 million barrels of Oil from the strategic petroleum reserve to cut retail fuel costs, the effect would be short-lived. Indeed, prices fell for a brief period before rising again, with the number of three-digit price estimates increasing. The strategic reserve release was already a desperate attempt to keep gasoline prices under control, which were being driven up by crude Oil prices.
They were being pushed up by a stronger rebound in global demand and OPEC countries’ output limits. The Omicron coronavirus variety, like the SPR release plans, had a temporary negative impact on benchmarks, but they were soon back on track. Brent crude is expected to reach $90 a barrel later this year, according to Morgan Stanley. This is also Goldman’s price projection.
JP Morgan recently predicted that petroleum might reach and beyond $100 this year, citing OPEC’s reduced spare capacity. Vitol, whose head of Asian operations told Bloomberg last week that Oil had further to rise due to constrained supply, is the latest to join the bullish chorus. This has negative implications for the Biden administration’s efforts to make fuel affordable to voters ahead of the midterm elections.
More SPR releases could be planned, but they would be ineffective compared to the original notice. Even with increased US output, if Brent rises towards $100, West Texas Intermediate will not be far behind. The issue, from a Washington standpoint, is that, despite increased U.S. output, global supply continues to fall short of demand, ironically due to OPEC, whom Biden personally pleaded with to increase Oil production in order to lower U.S. gas prices.