Trump plans another oil stockpile sell-off with global reserves already 'scarily thin'

The US Strategic Petroleum Reserve (SPR) dropped by almost 800,000 barrels last week, and the Trump administration moved forward with plans to sell another 40 million barrels in the coming months.

New data released on Monday by the US Department of Energy showed the US energy backstop sitting at 283 million barrels, down from 283.77 million the week prior.

That leaves about two weeks of US oil consumption in the reserve amid widespread worries about global stockpiles, which the head of Saudi Arabia's state producer on Monday called "scarily thin."

Amin Nasser, chief executive of Saudi Aramco, added at an Energy Intelligence Forum in London on Monday that releasing stockpiles will buy economies some time but won't fix the imbalances that have developed between supply and demand.

Yet these withdrawals in the US could soon accelerate after the Trump administration unveiled a request for bids from companies to buy up to 40 million barrels of crude oil from the SPR, with the aim of having the companies return those supplies "with additional premium barrels." The solicitation process is ongoing, and it's unclear if companies will agree to those terms.

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The Trump administration continues to wrestle with high energy prices, less than a month before the midterm elections, and is reportedly preparing an executive order to expand access ‌to tax-exempt diesel, with the president confirming on Monday afternoon, "I'll be helping [farmers] with diesel."

In recent days, G7 countries — including the US — announced a new set of plans to release up to 100 million barrels of emergency fuel, including "a frontloaded substantial diesel release."

A White House official told Yahoo Finance that Trump intends to follow through on a commitment to release a total of 172 million barrels from the SPR, which was announced earlier this year. 

The US energy backstop already sits at the lowest level seen since October of 1982, and a withdrawal of another 40 million barrels would put the reserve at its lowest level since records began being kept earlier in 1982, as the backstop was still coming online under President Ronald Reagan.

For his part, President Trump continues to project confidence that the US reserves will be quickly refilled. He told a crowd in Alabama over the weekend that, because of an energy deal with Venezuela, "we're going to be filling up very shortly our strategic reserves for nothing." 

Experts say that, despite Trump's promises, refilling the reserves will be a complex and far-from-free process that could take years.

Historically low levels

It was back in March that the Trump administration announced the US part of a worldwide release of government oil in response to the war in Iran, with plans to sell 172 million barrels from the US Strategic Petroleum Reserve to steady global markets.

But the announcement came amid plenty of signals that the withdrawals could be pared back.

"The releases out of the US strategic petroleum reserve go over about four months," US Secretary of Energy Chris Wright said in a Fox News interview at the time. "But this conflict, I don't think, goes that long."

Kevin Dietsch via Getty Images

Wright added that the Trump team had plans in place to "replace these strategic reserves with approximately 200 million barrels within the next year." 

Analysts at Goldman Sachs also cast doubt on the numbers at the time, suggesting all those barrels would be withdrawn only "under longer/much longer disruptions."

Yet seven months later, the administration has maintained a steady pace of withdrawals, and refills have yet to begin.

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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