Washington Pumps 92.5 Million Barrels from Oil Reserves to Lower Prices.. and Crude Exceeds $126

The Trump administration said it seeks to withdraw up to 92.5 million barrels of crude oil from the Strategic Petroleum Reserve in an attempt to calm oil markets that have seen a sharp rise due to the war with Iran.

But prices rose despite the withdrawal from reserves, as global oil prices briefly reached their highest level in four years, exceeding $126 per barrel on Thursday, amidst fears that the war would lead to a prolonged disruption in Middle East supplies.

The United States earlier this year agreed to withdraw 172 million barrels from the Strategic Petroleum Reserve as part of a broader agreement with more than 30 countries in the International Energy Agency to withdraw about 400 million barrels.

The United States has so far offered 126 million barrels of crude oil in three tranches, but oil companies have purchased less than 80 million barrels, or about 63 percent of the offered amount.

If oil companies withdraw the entire offered quantity, this will achieve the United States' goal of withdrawing 172 million barrels.

High oil prices pose a risk to President Donald Trump's Republican allies in the congressional midterm elections in November.

It is worth noting that the administration withdraws oil from the Strategic Petroleum Reserve in the form of loans that companies repay with additional barrels as a premium, a system that the Department of Energy says will help stabilize markets "without any cost to American taxpayers".

The Strategic Petroleum Reserve currently contains approximately 398 million barrels, which is roughly equivalent to four days of world consumption, and is located in a series of hollowed-out salt caverns at four sites along the coasts of Texas and Louisiana.

Source: reuters