Oil declines as Biden faces mounting calls for an SPR release
Oil fell as U.S. President Joe Biden faced more calls from members of his own party to tap the Strategic Petroleum Reserve to curb surging gasoline prices.
Futures in New York sank as much as 1.8% Monday. Senate Majority Leader Charles Schumer urged Biden over the weekend to release oil from the nation's emergency reserves, saying consumers needed immediate relief at the gas pump. Energy Secretary Jennifer Granholm told CNN that the President is evaluating the tools he has available, including a release from the Strategic Petroleum Reserve.
However, a release from the strategic reserves would only be a short-term solution and possibly worsen the problem, said Phil Flynn, senior market analyst at Price Futures Group.
"When you release oil to lower prices, it doesn't solve the underlying problem, which is demand is growing faster than supply," said Flynn.
As the U.S. mulls a crude-supply release, Saudi Arabia and the United Arab Emirates signaled that OPEC+ will continue to be cautious in its plans to raise output. The group has been adding 400,000 barrels a day of production each month on paper, although its members have failed to pump that much in practice so far. The modest release comes as oil has surged to multi-year highs as economic recovery and a global energy crisis have fueled demand.
The Organization of Petroleum Exporting Countries and its allies are particularly wary about the stability of demand in the coming months. Already in Europe, a handful of smaller consuming nations have reimposed restrictions as a result of Covid-19 cases. President Biden will also meet virtually with China's President Xi, the world's largest oil importer, later on Monday.
The Biden Administration's deliberations to release oil from the SPR comes as gasoline prices have hit a seven-year high, a political problem for Democrats who are experiencing sinking approval ratings. Even climate conscious democratic senators urged the President to act quickly to dampen prices by either tapping SPR or banning U.S. crude exports. Similarly to an SPR release, a U.S. oil export could do little to provide relief to American drivers while upending global markets.
All the while, Italy's Eni said oil may hit $100 a barrel due to a lack of investment from energy companies.
"Maybe it can reach that," CEO Claudio Descalzi told Bloomberg Television. "But not for a long time."
