Morning from Europe.

It was an eventful day in energy markets yesterday as Brent spiked above 95$ a barrel before the Biden administration apparently released a trial balloon around considering emptying the SPR fully.

Our interpretation is that the Biden administration is trying to test markets here and failed miserably in getting a bearish response. Biden needs a new drug (against higher Oil prices) and currently has no dealer.

If Biden wants to counter the oil-deficit (assuming a little less than 2.5mn barrels a day), the SPR will run out of juice in Q1-2024. That does not sound like a feasible solution with the election still almost a year away at that point.

On top of that, there is now ongoing chatter around SPR releases from China, but we struggle to see the incentives for China with 15-16mn barrels a day under effective control (Chinese + Russian production) and the continued massive discount buying Russian Ural oil.

Chart 1: The SPR will be depleted fast if Biden wants to fight Bin Salman