spit-balling

market vibes

June 3…)

Let’s get this straight…

At its peak the U.S. Strategic Petroleum Reserve (SPR) held over 700 million barrels, with a current maximum capacity of about 714 million barrels.

In March 2026, as part of a coordinated international effort the U.S. began releasing 172 million barrels through a series of term exchanges or “repo-loans”. Major oil producers and refiners like Exxon and Marathon borrow SPR oil and pay it back in extra barrels not cash. The SPR held over 415 million barrels when the program started. After the full release ends in July 2026, the SPR is projected to bottom out at approximately 243 million barrels, its lowest level in more than 40 years.

However, the NYMEX July 2026/November 2028 spread (29 months) is worth $26.00, meaning November 2028 futures are trading $70/barrel vs July at $96.00/barrel. A 25% premium on these loans would add about 45 million extra barrels when fully repaid, bringing the SPR to 215 million barrels above the 243 nadir in July 2026. Therefore the SPR will actually hold approximately 460 million barrels now in July 2026 of which more than 200 million barrels will be held in the forward curve.

These loans are not emergency drawdowns that require Presidential authority. They are routine lending frequently deployed to assuage temporary supply issues. Biden sold oil because he wanted to sell it in front of the mid terms and fwiw.. OPEC was cutting production.

These “loans” resemble project finance gold loans of the 1990s that suppressed prices for over a decade, ultimately embedding massive producer unmargined short positions. In 1999 Ashanti, a blue ribbon producer dating back to the 19th Century, blew up and the practice was abandoned but it took years to unwind the loans. There are nuances between gold then and oil now (contango vs backwardation), but at its core commodity lending or carry trading stimulates production and velocity of paper supply.

This is in the early stages of a predictable outcome, in my opinion.