China and the United States, the world’s largest and second-largest crude oil importers, respectively, appear to have enough strategic reserves to go through an oil supply disruption in the key producing region, the Middle East, in case the U.S.-Iran standoff escalates to U.S. strikes on the Islamic Republic.
Sure, any disruption to oil shipping in the Middle East would send oil prices higher from the current seven-month high of $71 per barrel Brent. The market panic in case Thursday’s U.S.-Iran talks fail could be even more disruptive to oil prices in the era of algorithmic trading.
Still, it would take a physical supply disruption to send oil to $100 per barrel, analysts say.
Iran could opt for igniting the region by attacking oil facilities in neighboring countries if Tehran’s leadership sees a U.S. campaign as an existential threat, many experts note.
If oil supply does become constrained, China and the U.S. have reserves to ease the pressure on prices, to some extent, Reuters columnist Ron Bousso argues.
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The U.S. Strategic Petroleum Reserve (SPR) currently holds about 415 million barrels of crude. Out of a capacity of 714 million barrels, it is less than 60% full at present as the U.S. has slowly rebuilt reserves following the major releases in 2022 at the start of the Russian invasion of Ukraine.
Even at just above half full, the world’s biggest strategic petroleum stockpile would cover about 200 days of net crude imports into the United States, per calculations by Reuters. That’s well above historical norms and the requirement of the International Energy Agency (IEA) that its members have at least 90 days of net imports of crude oil and refined products in strategic reserves.
Should the President order an emergency sale of Strategic Petroleum Reserve oil, DOE can conduct a competitive sale, select offers, award contracts, and be prepared to begin deliveries of oil into the marketplace within 13 days. Oil can be pumped from the Reserve at a maximum rate of 4.4 million barrels per day for up to 90 days, then the drawdown rate begins to decline as storage caverns are emptied. At 1 million barrels per day, the Reserve can release oil into the market continuously for nearly a year-and-a-half, the DOE says.
This could become an option for President Donald Trump if oil prices spike in the case of a longer military campaign in Iran and physical disruption to supply and shipping. With mid-term elections looming, no U.S. President would want spiking gasoline prices, especially when electricity prices have surged—contrary to pledges in President Trump’s presidential campaign.