Trump Vows To Refill SPR "Right To The Top" As China Tanker Rates Soar

 For much of the past year, oil traders struggled to find positive reasons to be optimistic about oil prices. Recently, however, they have found two key reasons. First, due to rising concerns of a surplus in supply and inventories, President Biden's recent sanctions on Russian oil exporters have cut approximately 1. 5 million barrels from daily supply, resulting in oil prices reaching a five-month high. Second, President Trump has stated his intention to refill the U. S. strategic oil reserve ("SPR") to its maximum capacity after it was significantly depleted during Biden's administration.

Trump highlighted his plan in his inaugural address, emphasizing his goal to lower prices, replenish strategic reserves, and promote U. S. energy exports. Currently, the SPR has a capacity of about 700 million barrels but stands at 394. 4 million barrels due to extensive sales under Biden's policies, which aimed to keep gasoline prices down in response to the Ukraine war. Although Biden began to refill the SPR, funding issues have halted further purchases.

Once funding is approved, traders may start purchasing oil preemptively, causing prices to rise, especially if China implements needed economic stimulus measures. Meanwhile, the ongoing sanctions on Russian oil are severely impacting the global commodity market, especially affecting shipping costs for oil tankers. Rates to hire supertankers for routes to China have more than doubled following U. S. sanctions.

The increase in tanker rates is driven by Chinese refiners seeking to replace lost Russian oil from other regions. For instance, hiring a very large crude carrier from the U. S. Gulf to China cost $9. 5 million last week, compared to lower costs in previous months. Additionally, if Trump intensifies actions against Iranian oil shipments, it could further maintain high tanker rates. Smaller vessel rates are also rising due to increased demand and limited supply.

https://www.zerohedge.com/commodities/trump-vows-refill-spr-right-top-china-tanker-rates-soar