Arguing that the White House is almost certainly considering selling oil from the Strategic Petroleum Reserve, Barclays Capital on Wednesday said two price thresholds might trigger such a release -- the US gasoline average crossing $4/gallon or Brent crude hitting $120/barrel.
"With the presidential election now less than three months away, it is inconceivable to us that a SPR release is not being actively considered," Paul Horsnell, head of Barclays' commodities research, wrote in a report. "It would be very surprising indeed if every bureaucratic and technical preparatory measure that is required up to the final declaration of a release was not either already in progress or had already been accomplished."
Gasoline cost $3.72/gal on national average Wednesday, up 25 cents from a month ago, according to AAA.
Front-month ICE Brent crude futures were trading around $115/b Wednesday afternoon.
In addition to prices hitting $4/gal for gasoline and $120/b for Brent oil, Barclays speculated that other triggers could be: "any sense of inevitability about $4 being reached" for the national gasoline average, any concern in the White House about the trajectory of the Iranian tensions or any concern about the extent of tightening of fundamentals in the global oil market.
If the White House does tap the SPR, Barclays suspects the crude infusion might not actually drag down prices much.
"It has, after all, been heavily trailed all year, and a market that feels short of crude might simply say 'thank you' for the crude, but not do much more than create a plateau for prices rather than a sharp fall," the report said.
The Obama administration has maintained for much of the past year that selling oil from the SPR remains an option for responding to market disruptions that could emerge from negotiations over Iran's nuclear program.
"As we've said for some time, a release of the Strategic Petroleum Reserve is an option that's on the table," Deputy Press Secretary Josh Earnest said last week.
During the last SPR sale, the US auctioned 30.6 million barrels of stockpiled crude last summer as part of the International Energy Agency's coordinated drawdown of 60 million barrels of crude and refined products to replace an estimated 2 million b/d of Libyan crude kicked off the market during that country's civil war.
