SPR Fill NOT Included in Stimulus

This week we will release our March editions of the Global Fuels and Global Crude Oil Outlooks and they will show a dramatic revision to our demand forecast for 2020. We now have oil demand falling by 2.9 million b/d on average for the year. That drop is driven almost entirely by contraction in the first and second quarters, and reflects changes to oil use as social distancing and quarantines have spread in countries around the world. We still expect recovery in the third and fourth quarters, which will prevent this demand contraction from being even larger.Up until today, we expected some of this contraction would be offset by strategic stocking by China, India and the United States. Combined they would add about 500,000 b/d of additional demand. However, the $2 trillion stimulus bill that was agreed in the U.S. Senate last night excludes the $3 billion dollars that was earmarked for an SPR purchase of 77 million barrels of crude oil, announced by the Department of Energy. Notably, this massive stimulus bill the Cares Act is phase three of the stimulus response to the COVID19. There are rumors of a phase four coming in another month and that appropriations for SPR could be included in that phase. But, it seems politics have kept it our of phase three and may keep it out of phase four. Apparently the Republicans refused to include an extension of the renewable tax credits in the bill and the Democrats removed the appropriation for the SPR, calling it a bailout for big oil.Without the SPR fill, the remainder of strategic stocking will be from China and India where inventories are building, some of which will eventually fill depots that are yet to be built. Instead of offsetting 500,000 b/d of the demand contraction, strategic stocking will now only offset about 300,000 b/d.

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