The first oil from US President Donald Trump's planned 172 million-barrel emergency release is set to start flowing soon, the latest move in the administration's battle to keep fuel prices in check.
Roughly 45 million barrels are being released from the US Strategic Petroleum Reserve, according to a document from the US Energy Department. That means that refiners and traders subscribed to about half of the 86 million barrels initially offered by the administration.
The level of interest in the volume of oil on offer was surprisingly low considering that Brent crude has traded above $100 a barrel, traders said. The war in Iran has led to a virtual halt in shipments through the Strait of Hormuz, through which 20% of global oil transits, with Brent closing at more than $112 on Friday.
Still, the US crude benchmark — West Texas Intermediate — has been trading at a steep discount relative to Brent, and that's partly because the giant release of American emergency reserves is bolstering the supply outlook for Gulf Coast refiners.
Even then, US retail gasoline prices have climbed to their highest in nearly four years, stoking fears over accelerating inflation. Trump is facing intense political pressure to address the sudden rise in fuel prices. November's midterm elections that will decide control of both houses of Congress hinge in large part on Americans' attitudes toward the costs of living, and polls show the public taking a dim view of the president's handling of the economy.
The stockpile release is part of a relief plan coordinated by the International Energy Agency aimed at lowering energy costs. At least 30 nations are releasing as much as 400 million barrels.
Under the terms of the exchange offer, eight companies, including refiners and traders, will borrow 45.22 million barrels from the emergency cache and should return it to the government's underground caverns, with a premium of at least 18%, as late as 2028. Shell PLC's trading arm was awarded the biggest amount, with 16.2 million barrels, followed by Trafigura Group, Marathon Petroleum Corp and BP Plc.
ALSO READ: America Is Easing Up On Iranian Oil To Cool Surging Crude Prices
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
