Crude oil prices came off the year high after a terror attack in England and as President Donald Trump continues to make history on his Middle East trip. First, President Trump cut a slew of business deals with Saudi Arabia and then he opened the door with a peace plan in Israel when he went to the wailing wall in Jerusalem and held a closed-door meeting with Prime Minister Benjamin Netanyahu and then delivered remarks in a joint press conference. Trump visited Mahmoud Abbas in Bethlehem and Abbas said that he opposes Palestinians occupation, not Judaism. This comes in the aftermath of the horrific terrorist attack at a Manchester England concert that killed 22 people, most of them children.
Back at home oil traders are getting a glimpse at President Trump’s budget that includes selling half of the United States Strategic Petroleum Reserve oil. (SPR). The White House says they can raise 1.5 billion dollars by selling the oil out of the reserve and if passed, could slow the global oil market rebalancing. Already we have seen how reserve sales from the United States have helped keep U.S. oil inventories high. If agreed to, the sale of reserve oil would start in October of 2018.
Of course, the President has the right to authorize sales from the reserve oil anytime he wants but in this case, it would have to be part of a budget package that still has major hurdles to go through on both sides of the aisle before it could pass. Still, the idea of selling oil from the reserve would garner bi-partisan support. The release may compete with U.S. shale producers whose efforts to increase U.S. oil output is one reason the oil in the reserve is not needed as much.
Last December, under a deal with the Obama Administration, Congress cut a deal to sell $2.0 billion of crude oil from the SPR to pay for maintenance and repairs and fund green energy projects. The U.S. Department of Energy sold 6.4 million barrels in January and another 10 million in February.
The budget also proposes that parts of the Arctic National Wildlife Refuge (ANWR or Arctic Refuge), a national wildlife refuge in northeastern Alaska, should be open to oil exploration. The budget projects that it could raise1.8 billion dollars and it could put U.S. oil production to above 10 million barrels a day up from 9.3 million barrel per day. The killing of ANWAR drilling was a former victory for Democrats that will fight tooth and nail to stop this. Not because it will have a big impact on the environment but because it is a trophy issue. They won’t like that the budget also calls for cutting funding for the Environmental Protection Agency by proposing a more than 30% cut to its funding.
In the meantime, that may be a problem for another day. Oil prices hit a one-month high and the bulls have regained momentum. Demand is picking up as the summer driving season kicks in and refiners will be running full out. U.S. exports of oil are surging and we should see a big 4 million barrel drop in crude supply as West imports fall and Cushing, Okla., drains by about 500,000 barrels.