Why US is releasing 86M barrels from emergency oil reserve
What's the story
The Donald Trump administration has initiated a major drawdown of the US emergency oil reserve, seeking to exchange 86 million barrels of crude oil. The Strategic Petroleum Reserve's deliveries will be part of a larger 172 million barrel release announced earlier this week. The Energy Department said these deliveries are likely to start hitting the market by next week-end.
Market impact
Oil prices surge since Iran-Israel conflict began
The oil release, which will take four months to complete, is part of a larger 400 million barrel effort with other countries. The move comes as crude, gasoline, diesel, and jet fuel prices have surged since the US-Israel invasion of Iran. The conflict has nearly halted shipping traffic in the Strait of Hormuz, a key route for global oil trade.
Exchange terms
Companies will have to return borrowed oil with extra barrels
Under the exchange agreement, companies will have to return the borrowed oil to the Energy Department along with extra barrels as a premium. Bids for this solicitation are due by 5:00pm CT on March 17 (3:30am IST, March 18). The Trump administration plans to replace the withdrawn oil with some 200 million barrels over the next year, which would be 20% more than what is being drawn down now.