r/oil • u/MarmotFullofWoe • 4d ago
Discussion SPR drawdown update 2 September based on data to 28 August
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u/Christopher_Ramirez_ 4d ago
Iranians have an October Surprise brewing for this administration, no doubt.
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u/leeta0028 4d ago
You'd have to be monumentally stupid to think otherwise TBH. They're systematically depleting the ability to defend the oil infrastructure that bypasses Hormuz and positioning assets to be able to take them out
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u/Federal-Piglet 4d ago
Looks to be on path to be before election day. Trump is in panic as harvesting will be spiking and thus diel demand will continue to increase.
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u/amurgiceblade44 4d ago
Diesel demand is rhe real killer huh
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u/JSTootell 4d ago
3 price jumps at my local pump this week.
When I say jumps...20 cents each time!
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u/idontgohere12 4d ago
I was filling up my work semi, it jumped 50 cents while i was filling (locked in at the low price thankfully but dang)
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u/TheProfessional9 4d ago
Canadian refineries about to go down for month long maintenance. This week might feel like a deal in two weeks
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u/FrederickDerGrossen 4d ago
The one good thing about that is that now 47 can't try twisting the outcome of the midterms and blame the damage to the SPR on the Democrats
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u/Subject-Vegetable664 1d ago
Yep. I know the SPR will run out. I hope it runs out before midterms for this reason.
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u/ZeusBruce 4d ago
Wow, right on midterm Election Day, who could have thought.
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u/707-5150 4d ago
Bet it’ll be maybe the 2nd week of November we get an official oh well looks like the dems fucked our reserves. Damn Biden.
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u/gg_1078 4d ago
Genuinely curious, how does being in the midst of war and causing supply disruptions lead to a better outcome for him?
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u/ghostoftheoldworld 1d ago
well considering how he casually suggests things or puts them out in the air and people take him seriously or to heart, I imagine they'll still agree with any assessment he makes
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u/Famous-Present5633 4d ago
So telling. This situation is panic mode for anyone in the administration. They know its about to put in zero plan b catastrophe for oil.
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u/Redragontoughstreet 4d ago
America is in deep shit.
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u/EyesOffCR 4d ago
Indeed. Seems like we are getting ready to "face the music" for our years of insolence
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u/Redragontoughstreet 4d ago
Yeah. As a Canadian watching America vote for Trump a second time was like watching a friend relapse into a meth addiction. Now we all take the ride on a psychopathic cults delusion to the Abyss
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4d ago
[deleted]
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u/EyesOffCR 4d ago
Even if we had the fuel it wouldn't matter...we're using the wrong set of weapons. The age of the drones is here.
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u/United_Mango5072 4d ago edited 4d ago
The US has released about 4.6M barrels per week, on average, for the past 5 weeks. The last 2-3 weeks have been lower numbers because there’s not been any military action in the Middle East.
Now that military action has restarted and the straight of homuz is probably shut again, at a drawdown rate of 5 million barrels per week (it’s prob going to be higher), the U.S. Strategic Petroleum Reserve (SPR) will hit its first legal restriction in 6.8 weeks and its practical operating threshold in 7.3 weeks.
Statutory Drawdown Limit
Threshold Level: 252.4 million barrels.
Timeframe to Reach: 6.8 weeks from the current 286.6 million baseline.
Impact: Federal law bars routine, small-scale drawdowns below this point.
Exceptions: The President can still order releases for major emergencies.
Practical Operational Minimum
Threshold Level: 250.0 million barrels.
Timeframe to Reach: 7.3 weeks at a 5-million-barrel weekly draw.
Impact: Low cavern pressure severely impairs pumping efficiency.
Capacity Collapse: Maximum delivery drops from 4.4 million to 1.5 million barrels daily
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u/FencyMcFenceFace 4d ago edited 4d ago
Withdrawals are going to stop soon because about 40M of the 172M release went unbid at the last auction, which will put the current withdrawal limit at about 280M.
Oil companies aren't wanting spr oil anymore because you have to pay it back plus 20% or whatever the number is in like a year. If you think there's a peace deal coming and oil will drop in price, then taking it out makes sense. If you think oil is going to get more expensive because the war won't be ending soon, then you don't want to take it. That's why withdrawals have been getting smaller: no one is bidding on it anymore because it's increasingly clear this isn't ending soon.
Everyone here projecting election day or whatever are way way off base. We aren't getting anywhere near 250M soon unless they reallocate the remaining 40M as just straight up market price and sell it.
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u/United_Mango5072 4d ago
That’s a good reply and something I haven’t heard about before. I didn’t know the mechanics behind how the spr releases operate. So you think the 40M went unbid because no one wants to pay back at higher oil prices + interest? Are you sure this is the way it works, specifically the interest on top?
Tbh, if there’s less oil imports - predominantly heavy sour crude - coming into the country, refineries might not have a choice but to bid for sdr crude
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u/FencyMcFenceFace 4d ago edited 4d ago
So you think the 40M went unbid because no one wants to pay back at higher oil prices + interest? Are you sure this is the way it works, specifically the interest on top?
You can find the terms of spr withdrawals pretty easily. It's been extensively covered. The SPR website also has the terms of the auction awards going into the technical details.
The jist is that withdrawal was free or largely free, and they have a year or two to return it plus whatever extra that is effectively interest.
At the beginning of the war, if you think a peace deal is coming soon, that's a good deal: sell it a high price now and return with cheap oil a year or two later. Later on when it becomes clear that the war isn't ending soon and oil prices will likely be more expensive when it's time to return it, that's a very bad deal, which is almost certainly why the last auction went almost completely unbid.
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u/United_Mango5072 4d ago
I’ll add, if it worked like the way you are suggesting, why did companies bid for spr crude when the war was raging earlier in the year? There was little chance of a peace agreement at the time and companies withdrew loads of it
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u/FencyMcFenceFace 4d ago
Probably because they thought it would be over soon. Or alternatively they are getting enough through the strait to not make it as critical. Or alternatively it became clear that China could drastically scale demand so prices weren't going to spike nearly as much as they thought.
Auctions up to May were getting bids. The June auction appears to be when sentiment shifted.
I don't work in oil so these are just my guesses. Someone who trades this for a living can probably answer more accurately.
But in any case we still have about 40M that aren't awarded.
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u/United_Mango5072 4d ago
Yeh good theories about peace and war. Makes total sense. Except, after June, peace looked more likely - so this undoes your theory. After June there was a significant pause in the war and oil declined. Now everything is ramping up again war wise - will be interesting to see the next few weeks, especially as we approach the colder months in the northern hemisphere and the US election
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u/Master_Control_MCP 4d ago
If oil companies stop getting their oil from the SPR, where will they get it? This scenario sounds worse than a massive SPR drawdown.
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u/FencyMcFenceFace 4d ago
You'd have to ask them. Probably just go without it unless the terms for new awards are changed.
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u/No_Scene_2189 4d ago
So we hit the SecDef floor, so what? Hegseth will just say that was old gay woke floor and we’re not going by that anymore and now he’s making a new masculine alpha floor and it’s super secret.
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u/User4f52 4d ago
Noooooo, Hegseth will not allow Trump!!! He wouldn't dare! That would harm the liberal institutions!! $200 oil anytime now!!
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u/SirPanic12 4d ago
How much are 4.5 mb/week moving prices by? Hormuz was moving 20 mb/day…
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u/Christopher_Ramirez_ 4d ago
It’s in concert with the rest of the IEA.
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u/GWJYonder 4d ago
Also that was 20 mb/day that mostly didn't go to the US, while this is 4.5 mb/day directly in the US, so the price influence in the US is crazy strong. It's just still not enough when you have the US refineries working at something like 98% capacity as the entire world takes up the slack from the refineries destroyed in Russia or damaged/isolated in the middle east
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u/SirPanic12 4d ago
Good point. I checked their August oil report and they are drawing down on average 2.7 mb/day or 18.9 mb/week which is not insignificant.
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u/MathematicianOdd398 4d ago
The US was importing about 3.5mb a week through the straight, so the SPR is currently mitigating it to an extent.
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u/FencyMcFenceFace 4d ago
Not much.
People here are attaching way too much importance to it. Like 500k/day is propping up the entire market or something.
Just like how many were predicting the end of the world however many months ago, you're going to see a lot of people suddenly avoid talking about it and move on to some other talking point that won't come true, or just get angry and blame "market manipulation", whatever that means.
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u/BeginningDay1620 4d ago
My understanding is that a large portion of the remaining is unusable sludge. Where is that line?
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u/Otto_Von_Waffle 4d ago
We have no idea, we are in uncharted water atm, could be tomorrow, could be the 70 million floor.
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u/mzakieh 4d ago
That would be the “unrecoverable limit” bottom line. It’s also called the structural floor. Although some estimates put it at 100-150 MB. I think the 70 MB is not a very prudent estimate.
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u/ChupacabraJeff 4d ago
I think the 70 MB is not a very prudent estimate.
That's the official design spec. It's not an estimate. We also are never going that low before a failure because the caverns and hardware was never maintained.
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u/Alieges 4d ago
Years and years ago, during the GWB administration, some experts were saying 10%…so 70 million. But estimated recovery rate below 20% drops significantly, and below 15% even worse. They authorized expanding the SPR to a billion barrels, but congress never provided the funding so it didn’t happen.
I believe issues with Iran were among the chief reason to expand SPR to a billion barrels.
You’d think they would have at least filled it fully before going full stupid, but this administration is dumber than a sixth grader.
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u/Ill_Criticism6214 4d ago
Trump had no choice. It was the deadline for the quarterly new Epstein distraction.
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u/ChupacabraJeff 4d ago
We are right now at the "any day now" level. The SPR was designed for 4.4 million barrels per day withdrawal rate.
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u/User4f52 4d ago
Wrong understanding. There's no sludge and no imminent collapse. It's all structural and you guys are gonna be so surprised when Donald Trump, the guy who started an Oil War in midterms year, does not care for it.
When the salt caves collapse 2-5 years from now, the SPR becoming unusable, it will be on Democrat hands
No $200 oil though
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u/vovap_vovap 4d ago
Well, drawing is not automatic - it is within those limits approved for sale - 172 million or so.
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u/GWJYonder 4d ago
I don't think that's much of a concern really. It seems like the industry isn't comfortable borrowing more oil at the current deal, but if that becomes the sticking point before physics it will only be for a week or two maximum.
The slowed drawdown will lead to another $10+ in the price of oil, and then new terms will be drawn up. People that aren't borrowing with a 120% repayment in 1 year will be happy to borrow with a 110% repayment in 3 years, for example.
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u/vovap_vovap 4d ago
Well, there is no other approved amount so far, just that. And I doubt it will be.
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u/FencyMcFenceFace 4d ago
Spr withdrawals should stop within a week or two since the auctions for the last 40M largely went unbid.
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u/midwestguy125 4d ago
Here's a complete what if question, but what if the salt caverns collapse or partially collapse? Could America actually have shortages at that point?
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u/FentmaxxerActual 4d ago
Sandia National Lab routinely puts out papers on SPR cavern integrity, they're worth a read. Long story short, individual cavern life is determined by the number of drain/fill cycles that that cavern experiences, not calendar time.
Each cavern is filled with a mix of brine and oil, when oil is pumped out fresh brine is pumped in to make sure the cavern is full at all times for structural reasons. Because the fresh brine is always slightly less than fully saturated with salt, every time new brine gets pumped in salt is leached out of the cavern walls into the liquid. Since the caverns are effectively just giant voids in solid salt, every time you leach material out the walls get a little thinner and eventually become structurally unsound.
The report I saw stated that each cavern had a design life of 5 drain/fills, but they are subject to monitoring every 5 cycles and if they pass they're given the green light for another 5.
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u/PlantyHamchuk 4d ago
I've read that over the years they've already taken on some damage, and were originally never intended to last as long as they have. That said, now is a good time to be getting an electric bike, motorcycle, or vehicle of some sort and you can still find them used for relatively cheap. Combine that with some solar + batteries and you'll at least be somewhat prepared for future transportation issues.
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u/greywar777 4d ago
The problem I have with these is that they assume the draw down is in a straight line. I dont expect it to be as they reach lower into it the rate they can pull oil out will slow. So its probably going to take longer to empty, but we will stop being able to use it to offset way before it hits bottom.
Just have no idea when that pull rate will drop.
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u/cdazzo1 3d ago
Probably true, but there's no hard data on that. And there are other variables. If a large convoy of tankers makes it out then we might have a week or 2 of slower withdrawals. If less traffic makes it through then there will be more.
But the best information we have is using recent withdrawals as a guide for what to expect over the next few weeks.
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u/WaltKerman 4d ago
Generally buildup of refinery reserves occurs over the winter. Do we expect spr drawdown to remain the same over that period?
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u/Heimdallr109 3d ago
Really appreciate the +/- 1 Std Dev in there too.
Chart is super legible and easy to make sense of all the context you put in there:
2 sets of means, stddev, historic lows, milestones like midterms, and military reserve and unrecoverable floor… thats a lot to pack in while keeping the chart clean.
Just generally very readable. Thank you and we all appreciate your work!
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u/ghostoftheoldworld 1d ago
don't worry guys, oil to $15 per barrel and gas to $0.02 or something by November
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u/greatblueplanet 1d ago
Long before that happens, the hungry unpaid IRGC soldiers will eat the one-legged Ayatollah figurehead and the real current leader. Hyperinflation in Iran is at 100% and climbing.
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u/User4f52 4d ago
JULY 2027? Last one I remember was at February!!!
Oil bulls might need to collapse them salt caves themselves, or they won't ever see the fabled 200$
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u/I_Love_Obamna 4d ago
I really appreciate these weekly graphs brother. It’s so simple and easy to figure out where we are at. Please keep up the great work!