RBC On The Potential U.S. SPR Release

RBC note that “with OPEC showing no signs of increasing output beyond the planned 400K bpd per month and only two countries holding material spare capacity, the Biden administration appears poised to announce the single-largest SPR release in history in conjunction with the IEA. With the previous SPR releases, the Biden administration has been targeting price, which marked a break from prior policy of using stockpile releases to backfill a major supply disruption or refinery outages. Given that the Biden administration is taking a very muscular stance toward Moscow, promising further sanctions if Russia continues to wage war in Ukraine, we believe that the SPR release is being used as a tool to blunt the impact of these foreign policy decisions for US consumers. It will be important to see whether this release announcement will be an effective shock and awe tactic given that Russian energy losses are likely to climb as the military campaign intensifies and the humanitarian crisis in Europe grows more dire.”