U.S. Emergency oil reserves fall to lowest levels since 1984

Emergency crude oil stocks held by the United States government plummeted by 8.4 million barrels last week to 434.1 million barrels, which represents their lowest figure since October 1984, according to U.S. Department of Energy (DOE) data, which was released on Monday.

The release from the Strategic Petroleum Reserve (SPR) in the week ending September was the steepest drop since May. The oil deficit was made up of about 6.3 million barrels of sweet crude and approximately 2 million barrels of sour crude.

In March, President Joe Biden in March put in place a plan to release 1 million barrels per day over a six-month period in an attempt to tackle high U.S. fuel prices, which have contributed to already high inflation.

The Biden administration is currently pondering over further SPR releases since the current program will end in October, Energy Secretary Jennifer Granholm confirmed to news outlet Reuters last week. However, a DOE spokesperson clarified that the White House is not considering new releases beyond the 180 million barrels to which they have already agreed.

Last week, the 50-day moving average of U.S. and European prices both fell below the 200-day moving average, Paul Sankey, who is an oil and gas equity analyst, said.

The SPR stocks have also went down as a result of sales from congressional mandates and Biden’s price initiative. The oil is sold to qualified oil companies via online auctions, and prices are set using a five-day average.

The DOE has said they will top-up the SPR by allowing it to enter contracts to purchase oil in future years at fixed prices, which will be agreed by both parties. The Biden administration said it believes the plan would be a shot in the arm for domestic oil production.