Quick overview

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US President Donald Trump has planned an emergency release of 172 million barrels of oil, the first scheduled to begin flowing soon. According to a US Energy Department document, the US Strategic Petroleum Reserve is releasing about 45 million barrels.

This indicates that roughly half of the 86 million barrels the administration first offered were subscribed to by traders and refiners. Considering that Brent crude has traded above $100 per barrel, traders said there was surprisingly little interest in the amount of oil on offer.

Twenty percent of the world’s oil passes through the Strait of Hormuz, where shipments have virtually stopped due to the conflict in Iran. Brent closed at $112 on Friday.

The massive release of US emergency reserves is improving the supply outlook for Gulf Coast refiners, which is one reason why the US benchmark crude, West Texas Intermediate, has been trading at a sharp discount to Brent.

Even so, concerns about rising inflation are heightened by the fact that US retail gas prices have reached their highest point in almost four years. Trump is under tremendous political pressure to address the unexpected increase in fuel prices. Americans’ opinions about living expenses will play a significant role in the midterm elections in November, which will determine control of both chambers of Congress.

Polls indicate that the public has a negative opinion of the president’s economic management. The International Energy Agency’s relief plan, which aims to reduce energy costs, includes the stockpile release.

Up to 400 million barrels are being released by at least 30 countries. Eight businesses, including traders and refiners, will participate in the exchange offer.