any comments from US officials as-to when they start to replenish the US strategic oil reserve…….?

Eoin Treacy's view

Thank you for this question which may be of interest to other subscribers. I’ve been contemplating the same question over the last week, but I framed it differently. Can the US government afford to refill the Strategic Reserve?

It is well understood that selling 577 million barrels from the reserve in 2022 partially reduced the cost of gasoline. The less discussed factor is it also provided much needed funds to the federal government.  The average price of West Texas Intermediate was around $94 for 2022. That represents around $50 billion in income for the government. 

The Strategic Reserve is mostly filled by opting to receive oil instead of royalties for production from state-owned land. Since the question of the debt limit is about to become a political circus, it is very unlikely the US government is going to have the financial leeway to forego revenue. The Federal Reserve is also running a loss at present so there will be no remittances to the government from that source this year either. That suggests refilling the reserve will have to wait.

Moreover, refilling the reserve is not an urgent concern. The USA is exporting more oil than ever. The reserve was set up in the aftermath of the oil embargoes of the 1970s. the situation could not be more different today. There will be urgency behind this question in future because oil fields do eventually peak but that is not an immediate concern.

Crude oil is a very volatile trading instrument. The times when it is inert do not last. This week’s breakdown suggests the path of least resistance is lower. That’s bad news for the energy sector because many investors were betting 2023 would be the third year where it would be the best performing asset class.