More Oil From U.S. Strategic Petroleum Reserve Heads To Europe

More Oil From U.S. Strategic Petroleum Reserve Heads To Europe 1

Yves here. We’ve seen mention from time to time that the US is sending some of the oil coming out of its Strategic Petroleum Reserve to Europe. That in theory would seem not as controversial as it ought to be, since oil prices had softened as a result of the impact of lockdowns in China on its energy demand.

However, as readers know all too well, gas prices, which are what the Administration had wanted to contain, are rising due to scarce refinery capacity. From CBS:

The average price of a gallon of regular gas rose to $4.42, according to AAA. That’s up from from $4.10 and $3 in May of last year…

Gas now tops at least $4 per gallon in every U.S. state….

A drop in oil refinery capacity is also pushing up prices. Refineries turn crude oil into gas and other products; since 2019, refinery capacity in the U.S. has shrunk by about 1 million barrels per day….

At the same time, inventories of gasoline in the U.S. have fallen to a 14-week low, according to data from the Energy Information Administration. A ban on oil and gas imports from Russia, which sent some refined products to the U.S., is also contributing to the shortage….

[Michael] Jennings [CEO of HF Sinclair] said that the drop in capacity as well as crude oil supply since before the pandemic amounts to 2.5% of world consumption.

“It’s a big number,” he said.

According to Reuters, distillers have also changed their output to create more diesel and jet fuel in order to meet demand in Europe. That means they’re producing less gas at a time of year when output should normally rise to prepare for summer’s busy driving season.

Mind you, this isn’t 2008, where $4 at the pump played a role in triggering a real economy downturn, which fed into the accelerating mortgage bust. But it adds to consumer pain. And refinery constraints, a car-unfriendly output mix, and ongoing crude shortfalls don’t equate to relief any time soon.

The article below mentions the Hungary-EU row over the EU’s proposed Russian oil ban. Hungary’s proposed compromise isn’t much of one, at least from the EU’s vantage: to exempt oil transported by pipeline. Not only is Hungary’s Russian oil delivered that way, but so too is most of Europe’s.

By Tsvetana Parskova, a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice

Europe is set to receive more cargoes of U.S. crude from the Strategic Petroleum Reserve (SPR) as the European Union discusses an oil embargo on Russia and looks to reduce reliance on Russian oil, Bloomberg reported on Thursday, citing tanker-tracking data and sources with knowledge of the shipments.

In recent weeks, Europe has increased purchases of U.S. crude as it considers the details of a ban on imports of Russian crude and refined products.

A week after the European Commission officially proposed a full ban on Russian crude and oil product imports by the end of the year, the EU is still scrambling to find a common position, trying to persuade Hungary and some other central European countries to drop their opposition to an embargo.

“We made progress, but further work is needed,” European Commission President Ursula von der Leyen said late on Monday following a meeting with Hungarian Prime Minister Viktor Orban.

Meanwhile, U.S. crude is flowing to Europe at rates never seen before.

Two cargoes of high-sulfur crude from the U.S. strategic reserve are headed to Italy and the Netherlands, according to tanker-tracking data and sources briefed by Bloomberg. The tankers have loaded crude at terminals connected to storage caverns of the SPR in Texas and Louisiana.

According to Matt Smith, oil analyst at commodity data firm Kpler, these would not be the last crude exports out of the U.S. SPR to Europe.

In April, some 1.6 million barrels of U.S. crude from the strategic reserve made its way to Europe, Smith told Bloomberg, adding: “That’s the largest amount of SPR crude that’s been shipped to the continent based on historical monthly data.”

Although the EU is still working out the details of an embargo on Russia’s oil, many buyers in Europe are generally staying away from Russian crude and products, while May 15 is the deadline for European buyers to wind down and halt transactions with Russian oil firms, including Rosneft.

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