Release of Strategic Oil Stocks Would Be 'Irresponsible': Analyst
A release of oil from the U.S. Strategic Petroleum Reserve (SPR) to counter rising oil prices would be irresponsible, Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch told CNBC on Monday.
Last week, Reuters reported that Britain and the U.S. were set to agree to release stockpiles together ahead of the peak summer season. Blanch said a move now would be politically driven and he did not expect it to happen, unless there was a supply disruption from Iran.
"I don't think it's going to be very effective in the end, so unless we do see a proper disruption in Iranian supplies, which we haven't seen yet; unless we see some kind of military conflict in the region, I don't think it's very likely."
Oil prices have rallied 42 percent since last October’s lows. The surge pushed average gasoline prices in the U.S. to $3.87 a gallon, with some cities such as Los Angeles seeing prices of more than $4 and raising concerns about the impact on consumer spending.
Iran currently produces 3.38 million barrels of oil per day, according to the International Energy Agency, while the SPR holds 696 million barrels of oil as per the Department of Energy. Theoretically, that's enough to cover Iran's entire production for more than six months.
But, as Reuters reported last week, the logistics of getting the crude to refiners is more complicated than ever, which will likely slow the release of oil supplies in the event of an emergency.
In June last year, the U.S. and other members of the IEA agreed to release 60 million barrels from global stockpiles to meet supply shortfalls caused by the conflict in Libya. Thirty million of those barrels came from the SPR.