SPR Stockpiling Seen Having Negligible Price Impact
Standard & Poor
|Wednesday, March 31, 2004
Efforts by the United States to stockpile oil supplies for the nation's Strategic Petroleum Reserve (SPR) represent a very small percentage of the overall market for oil, and are seen as having a negligible impact on global oil prices, according to an analysis by equity analyst Tina Vital, of Standard & Poor's Equity Research Services.
"Energy markets continue to be dominated by low world crude oil inventories of near 2.5 billion barrels for the OECD countries -- and low U.S. inventories of over 294 million barrels -- both of which are near the bottom of their five-year range" says Tina Vital, Integrated Oil & Gas Equity Analyst, Standard & Poor's Equity Research Services. "As a result, world oil prices are over $35 per barrel -- but the main driver, in our view, is stronger than expected world oil demand, particularly from China."
"In this context, we do not see much price impact from the relatively small additions to the SPR, which was established in 1975 when President Gerald Ford signed the Energy Policy and Conservation Act to stockpile reserves to be used in the case of a severe supply disruption that threatens national security. As of March 26, the SPR held 651 million barrels and was about 93% full. Over the past 15 years, maximum additions to the SPR totaled 0.21 million barrels per day. In a nation that consumes more than 20 million barrels per day, in a world that consumes over 81 million barrels per day, that represents about 1% of U.S. consumption, or 0.3% of global consumption. Therefore, we believe additions to the SPR have been relatively small compared to the market, and are expected to have a negligible impact on oil prices, which are priced as a global commodity," concludes Vital.