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Biden unintentionally pushes oil prices higher

News.  US President Joe Biden announced that he intends to release up to 50 mln bbl of oil from the nation’s Strategic Petroleum Reserves (SPR) in an effort to bring down gasoline prices.

Comment. Biden also announced that his administration is engaging with several other oil importing countries to sell oil from their strategic reserves. In the coming months, according to the US media, up to 18 mln bbl of SPR oil could be sold in the United States. Biden's statement were followed by remarks from the officials of the importing countries that these countries support and approve the decision of the US President and intend to follow suit or take similar action, since Japan announced its intention to sell only about 4-5 mln bbl of oil from its state reserve, while India will release no more than 5 mln bbl, and China 7 mln bbl, although, according to media reports, the latter sold its reserves much earlier. The UK limited oil sales from its reserves to only 1.5 mln bbl, and South Korea said that it supports Biden's decision, but did not say how much oil it plans to release. In addition, the US President did not rule out that he may approve a motion spearheaded by senators to temporarily ban US oil exports. Biden’s move drew sharp criticism on social media, especially as oil prices railed over 3% on Tuesday. After his statement, Biden was trolled as ‘Joe the Joker’ on some US social networks. However, the combined volumes of the release even on the part of all importers involved in Biden’s initiative are too small to significantly move prices south, while the ban on oil exports would only lead to even higher prices.

Market reaction. Brent shot up 3.3% to $81.28/bbl in the wake of Biden’s statement.

Forecast. Brent could hover in the range of $79-82/bbl over the next few days.

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