- does it explain the size of the added discount,
- might it predict a reduction in that discount when the SPR release ends (sudden loss of heavy oil supplied to the market), and
- might it predict increased demand for heavy oil when the SPR release ends and it is decided that our national security needs dictate that the SPR be replenished with heavy oil?
SPR is going down. Everyone knows that. What is less known is the SPR has two types of crude: sweet and sour. The sour is heaver and thus as many on this board know, in more demand. The permian is producing tons of light sweet. So...
Guess which oil the SPR is selling? mmm.
Facts:
On Dec. 31, 2019, the SPR had:
251 million sweet and 384 sour (2019 annual report to Congress)
The current release shows the following:
234 million sweet and 264 sour
So since the end of 2019, they have sold 17 sweet and 121 sour or 88% sour.
Now lets do a little math:
If the Admin continues for 16 weeks and the same percentage of sweet/sour mix is used (which is somewhat conservative because there is evidence even more is sour) the following will be left:
220 Sweet
164 Sour
So in a very short time, the amount of sour oil in the SPR is going down to very low levels. Another way to put this:
A current rate of sales they have 42 weeks of sour left. After that it will be ZERO.
How much sour oil will be in the SPR by the end of 2022?