US strategic oil reserve falls to lowest since 1982 as Iran war release drains stocks

A smaller emergency reserve reduces Washington’s ability to respond to any fresh supply shock, which could add to the risk premium in crude if the Iran war escalates. Goldman Sachs estimated last week that spot Brent carries a premium of nearly $25 a barrel above fair value (I'll have more to come on this separately), citing near-record-low global inventories as one of the factors keeping prices high. Because the release is structured as an exchange, around 200 million barrels are due to be returned to the reserve, so refilling will add a source of demand later and could support prices further out. For now, continued drawdowns add barrels to the market at a time of tight supply, but traders are likely to watch how much firepower remains in reserve.---Earlier:investingLive Americas market news wrap: AI trades rebound but so does oil---America’s emergency oil stockpile has been doing exactly what it was built for, and the cost is a reserve now back at levels not seen since the early 1980s.Summary:Crude stocks in the US Strategic Petroleum Reserve fell to around 283 million barrels last week, the lowest since October 1982, Reuters reported, citing Department of Energy data.The drawdowns are part of a US commitment to release 172 million barrels, announced on 11 March.The US release is part of a 400 million barrel coordinated release agreed by 32 IEA member countries in response to Middle East supply disruptions.The release is structured as an exchange, with around 200 million barrels due to be returned to the reserve.The SPR is less than 40% full, against an authorised capacity of 714 million barrels across four Gulf Coast sites.Crude oil stocks in the US Strategic Petroleum Reserve fell to around 283 million barrels last week, their lowest level since October 1982, Reuters reported, citing data from the Department of Energy.The decline reflects an ongoing release of 172 million barrels from the reserve, which the US agreed to on 11 March as part of a coordinated response to supply disruptions caused by the war with Iran. The US contribution forms the largest share of a 400 million barrel release of crude oil and refined products agreed unanimously by the 32 member countries of the International Energy Agency.The release has been slower than first planned. The Department of Energy said in March that deliveries would take about 120 days at planned discharge rates, which implied completion by around mid-July. Instead, drawdowns have continued into October. Based on Energy Information Administration data, the reserve now holds roughly 130 million barrels less than when the release began.The reserve was created in the 1970s, after the Arab oil embargo exposed how vulnerable the US was to supply shocks. It has an authorised storage capacity of 714 million barrels held in underground salt caverns at four sites along the Gulf Coast. At current levels, it is less than 40% full.Unlike an outright sale, the release is structured as an exchange. Companies that take barrels from the reserve are required to return them later with additional volumes, and the Department of Energy has said it expects to recover around 200 million barrels within a year at no cost to taxpayers. That means the drawdown should eventually reverse, although refilling will itself add to demand in the oil market once it begins.The low level comes as crude prices remain elevated. Goldman Sachs said last week that spot Brent carries a risk premium of nearly $25 a barrel above its estimate of fair value, pointing to the threat of further supply disruption and near-record-low global inventories. A depleted emergency reserve leaves the US with less room to respond if the conflict escalates and supply is disrupted again.The pace of further drawdowns, and the timing of any refill, will be closely watched by oil traders in the coming months. This article was written by Eamonn Sheridan at investinglive.com.