The US is currently adding about 820k barrels per day of oil to the 100 million bpd global oil market via the release of strategic reverse. The pace of sales has been below the 1 mbpd mandate level, likely due to technical issues.
The sale of barrels in storage is set to continue into October but it's an open question regarding what happens beyond that. The SPR is down to 480 million barrels, which is the lowest since 1986.
Of course, that's still 480 million barrels, which is enough to add 1 mbpd for another 480 days.
The thinking though is that the SPR's lower limit outside of a true emergency is 300 mbpd to ensure smooth operation. Beyond that, there's the politics of emptying US stockpiles at a time when there's no genuine shortage.
Late on Friday after the market close, we got a hint of what's to come.
The Strategic Petroleum Release “was really a stop-gap measure,” said Amos Hochstein, Biden’s Special Presidential Coordinator for International Energy Affairs. “We can't be an oil supplier. It's a reserve and so we have to keep that.”
Hochstein said that US companies will fill in the gap by increasing production by 800k/bpd to 1 mbpd by year end.
That's optimistic as drilled but uncompleted well inventories continue to dwindle. We heard from oil and gas servicing companies last week who said that they're fully booked this year and that employees and pipe are extremely difficult to find. Finally, we heard this from the WSJ last week regarding Saudi supply.
Saudi Arabia is now also close to the limit of what it can pump comfortably and for a sustained period, according to people familiar with Saudi oil operations. The kingdom has said its production capacity stands at around 12 million barrels a day. It is currently producing about 10.5 million barrels a day, according to people familiar with the matter. That means it could potentially increase output by at least another 1.5 million barrels a day. But the people familiar with the operations say Riyadh would struggle to produce 11 million barrels a day for more than a few months at a stretch and 12 million barrels a day for more than a few weeks.
Today, we also heard from Argus who said that OPEC pumped 2.84 million barrels per day under its collective quota in June.
WTI crude oil is still precariously close to the recent lows but there's a $9 spread to brent and that should encourage exports and a narrowing gap.