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The Biden administration said Friday it is buying 3 million barrels of oil to begin to replenish U.S. strategic reserves that officials drained earlier this year in a bid to stop gasoline prices from rising amid production cuts by OPEC and a ban on Russian oil imports.
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President Joe Biden withdrew 180 million barrels from the Strategic Petroleum Reserve starting in March, bringing the stockpile to its lowest level since the 1980s. The purchase, to begin in January, will start to replenish the reserve and is likely to be followed by additional purchases, officials said.
The Energy Department called the purchase \"a good deal for American taxpayers'' since the price will be lower than the $96 per barrel average the U.S. oil was sold for. The replenishment also will strengthen U.S. energy security, the department said in a statement.
The administration completed the release of 180 million barrels in October. The reserve now contains roughly 400 million barrels of oil, down from more than 600 million in late 2021, according to the Energy Department.
The idea of getting paid to hang onto a barrel of oil may sound appealing to everyday investors. But traders were actually dumping futures contracts, or agreements to receive physical barrels of oil due to arrive in May. The standard contract is for 1,000 barrels, each of which holds 42 gallons of oil.
Following a subsequent decision by Biden in October to release an additional 15 million barrels after a record release of 180 million barrels in March, the U.S. strategic oil reserve dropped below 400 million barrels for the first time since 1984, according to the Energy Information Administration.
On Thursday, WTI crude shed 4% to trade at $23.48 per barrel. At the beginning of the year, prices topped $63 per barrel. The steep decline is pressuring the highly-levered energy sector. Companies have announced capital spending cuts, dividend reductions and job losses as they struggle to breakeven with lower oil prices.
The Japanese-made Safer was built in the 1970s and sold to the Yemeni government in the 1980s to store up to 3 million barrels of oil pumped from fields in Marib, a province in eastern Yemen. The impoverished Arab Peninsula country has for years been engulfed in civil war.
This week, the Biden Administration said it would release an additional 15 million barrels of oil from the strategic petroleum reserve in an effort to curb gasoline prices. The White House has also chastised oil companies for not producing as quickly as Washington wants.
Oil prices have skyrocketed this year. WTI, the primary U.S. oil benchmark price, is up roughly 75% in 2021, recently closing at around $83 a barrel. Oil market watchers believe crude prices could have further to run as the economy picks up speed at a time that major producers are still holding back supply.
With crude oil nearing $100 a barrel, we asked some of our energy contributors for their favorite oil stock play. Here's why they think ConocoPhillips (COP 1.86%), Devon Energy (DVN 2.51%), and EOG Resources (EOG 2.06%) are in the best position to cash in as crude oil prices approach $100 a barrel.
The upshot here is that ConocoPhillips is now positioned to benefit even more from rising prices. To be sure, if oil falls the company will feel the hit more than a diversified integrated oil major. However, if you have a strong conviction that oil prices are heading toward $100 a barrel, this focused exploration and production name should be on your short list. You'll also be able to collect a 2.4% dividend yield along the way, though that's probably not by itself a sufficient reason for buying ConocoPhillips.
Neha Chamaria (Devon Energy): Investors in some oil stocks haven't had it this good in years. Not only are some of the larger oil producers minting a lot of money from higher oil prices but they're also returning large chunks of it to shareholders in the form of big, fat dividends. That means if an oil stock has pegged its dividends to oil prices, you could pocket a lot more money if oil prices shoot to $100 per barrel. That's exactly what investors in Devon Energy can expect to see, thanks to the company's new fixed-and-variable hybrid dividend policy instituted earlier this year.
Matt DiLallo (EOG Resources): EOG Resources has one of the lowest-cost oil businesses in the U.S. The company can generate enough cash flow to maintain its current production rate as long as WTI averages $30 a barrel. Meanwhile, it only needs WTI at $36 a barrel to cover its 1.8%-yielding dividend. Because of that, it's producing a gusher of excess cash flow at the current $80+ WTI price.
EOG estimated it could produce an additional $2.3 billion of free cash during the second half of the year if oil averaged $65 a barrel. With crude well above that level, EOG is on track to significantly exceed that number.
The oil futures drunk-trading incident was an incident in which Steven Perkins, an employee of London-based PVM Oil Futures, traded 7 million barrels (1.1 million cubic metres) of oil, worth approximately US$520 million (340 million) in a two-and-half-hour period in the early morning of 30 June 2009 while drunk. These unauthorised trades caused the price of Brent Crude oil to rise by over $1.50 a barrel (equivalent to $1.89 in 2021) within a short period of time, a trend generally associated with major geopolitical events, before dropping rapidly. As a result of the trading, PVM Oil Futures suffered losses of almost $10 million and Perkins was dismissed, later being banned from trading by the Financial Services Authority (FSA).
The cost of oil worldwide rose from $71.40 per barrel to $73.50 per barrel, the highest in eight months, before the trend reversed sharply; the total increase due to Perkins's trading was more than $1.50 per barrel, which is generally only caused by major events with geopolitical significance. For comparison, a $2-per-barrel increase would have cost $175 million worldwide.
Oil ImportsWhere does America get all the oil it needs? The U.S. imports roughly half the total -- over ten million barrels of crude oil a day. Canada is the top source, at nearly 1.8 million barrels. Mexico, Saudi Arabia, Nigeria, and Venezuela are numbers two through five, each exporting more than one million barrels a day. Angola, Iraq, Colombia, Kuwait and Algeria round out the top ten; each exports between 273,000 to 641,000 barrels a day.
The Future of Alaskan OilWhen oil was doscovered in Prudhoe Bay on the North Slope of Alaska, it was the single largest field ever found in North America. The 27-square mile oil field was small in size, but prolific in volume. It has already produced 15 billion barrels of oil. In 1988 the Trans-Alaska pipeline hit its peak, transporting 2.02 million barrels a day; since then it has been on a decline. In 2005 Alaska averaged 872,000 barrels a day with 400,000 coming from the North Slope. The total amount is expected to decrease by 20,000 barrels a day in 2006. No one knows for sure just how much is left. There has been only one other big find in Alaska, but it's small in comparison to Prudhoe Bay. That source, called Alpine, outputs 63,000 barrels a day.
A Controversial SourceToday there are few large-producing oil fields left to be tapped in United States. U.S. Geological Survey officials believe the best prospect is 60 miles east of Prudhoe in the Arctic National Wildlife Refuge, a federally protected wilderness area. Speculation about the amount of oil in the ground varies wildly. Proponents say the site holds 16 billion barrels, while opponents argue that the number is closer to three billion barrels. Government officials estimate ten billion barrels. According to a recent Energy Information Administration forecast, oil supplies flowing from the refuge -- at peak production in 2025 -- would reduce America's dependence on foreign oil from 70 percent to 66 percent. President George W. Bush's plan to drill in the refuge has already been rejected by lawmakers twice and is not expected to be passed any time soon. 041b061a72