U.S. Strategic Oil Reserves Fall To 1983 Lows

Key Insights

• EIA report indicated that strategic petroleum reserves fell to new lows. 
• Crude inventories increased by 19 million barrels from the previous week. 
• WTI oil continued to trade in the $76 – $77 range. 

SPR Declines To New Lows

On January 11, the EIA Weekly Petroleum Status report indicated that U.S. Strategic Petroleum Reserve (SPR) fell to new lows of 371.6 million barrels.

The SPR levels has been steadily declining for many months as the U.S. administration released oil from the reserves to put pressure on oil prices in order to fight inflation.

Currently, SPR settled at levels that were last seen back at the end of 1983. It should be noted that U.S. oil consumption has grown since 1983. At some point, the U.S. will be forced to buy more oil to refill the SPR, which will likely serve as a bullish catalyst for oil markets.

U.S. Domestic Oil Production Increased To 12.2 Million Bpd

The EIA report indicated that crude inventories increased by 19 million barrels from the previous week. Total motor gasoline inventories grew by 4.1 million barrels, while distillate fuel inventories declined by 1.1 million barrels. Meanwhile, domestic oil production increased by 200,000 bpd from the previous week.

Interestingly, the major increase in crude inventories and the growth of domestic oil production were not interpreted as bearish signs by the market. WTI oil continued to trade in the $76 – $77 range after the release of the EIA data.

The market is supported by the new lows reached by the U.S. Strategic Petroleum Reserve. In addition, Russia announced that it would take measures to decrease the discount on its Urals oil. According to Neste, Russia’s Urals oil is selling at a discount of more than $30 to Brent oil. Traders suspect that Russia’s measures would include a production cut, which would be bullish for oil markets.

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