Goldman: U.S. SPR crude releases to have modest price influence

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The Biden administration’s plan to continue releasing the Strategic Petroleum Reserves (SPR) “as appropriate” to bring down retail rates poses limited downside from current crude price levels, Goldman Sachs said in a note dated Thursday.

President Joe Biden on Wednesday said the United States will sell 15 million barrels (mb) from the nation’s SPR by year-end, intended to prevent oil price spikes in the wake of a decision by OPEC+ oil-producing nations to cut oil production.

The announcement, however failed to ease oil prices, as official U.S. data showed the SPR last week dropped to their lowest since mid-1984, while commercial oil stocks fell unexpectedly.

“We find incremental SPR sales as the most likely action (16 mb is available from FY2023 Congressionally mandated sales), although this remains price dependent… Such a release is likely to have only a modest influence (<$5/bbl) on oil prices however,” the bank said.

Retail gasoline prices would likely need to be higher than present levels in order to warrant such a release, Goldman said, adding the threshold is likely to shift significantly higher toward the $125/bbl crude, or $5/gal retail gasoline range once the political hurdle of the November U.S. midterm elections has been overcome.

On the outcomes of the United States considering a possible product export ban, Goldman cautioned that such a ban could send wholesale global distillate and gasoline prices up by $150/bbl and $50/bbl respectively, and would still risk shortages and higher domestic prices.

The bank had this month raised its 2022 Brent price forecast to $104 per barrel, and 2023 forecast to $110 per barrel as it expected the 2 million bpd output cut by OPEC+ producers to be “very bullish” for prices. (Reporting by Kavya Guduru in Bengaluru; Additional reporting by Swati Verma; Editing by Josie Kao)