One of the world’s greatest oil traders wants to buy more oil

As digital ink is spilled by the barrel discussing President Joe Biden’s legacy, let’s highlight one part that sticks out for market-watchers: He’s one of the greatest oil traders of all time.

Biden’s decision to begin releasing oil from the US’s stockpile (known as the Strategic Petroleum Reserve) in November 2021 was, at the time, and with the benefit of hindsight, unnecessary.

But the future massive reserve release announced in March 2022 to respond to the price surge brought about by Russia’s invasion of Ukraine was a resounding economic, financial, and geopolitical success.

Crude oil (and importantly for consumers, gasoline) prices are invariably higher under the counterfactual in which Biden lets the free market sort it all out. US oil exports surged during this time, helping Europe navigate its more acute energy price spike and shortage.

And then there’s the PnL consideration: When the Biden administration was emptying out the tanks of the SPR in 2022, front-month West Texas Intermediate futures averaged nearly $95 per barrel. Over the past year, during which the Strategic Petroleum Reserve has been growing once again, prices averaged around $80 per barrel.

To put it simply: under Biden, the US has sold oil when it’s high, and bought it back when it’s low.

Of course, Biden’s de facto short position in oil is still open, and very large: the US has released way more oil than it’s bought back.

But in a world where shale is A Thing, private firms’ time-to-market for oil can be a lot quicker than a pre-2012 environment. Conceptually, you can think of the reserves associated with drilled-but-uncompleted wells (DUCs) as a relatively flexible form of crude oil supply that can be tapped via price signals that helps augment the SPR. (Granted, DUCs are now at their lowest level in at least a decade, as private energy producers sought to be able to control capital expenditures while increasing production and being as shareholder-friendly as possible). With both the SPR and DUCs, a largely known quantity of oil is sitting underground. The difference is all in the ease of access and timeliness.

Deputy Energy Secretary David Turk told Bloomberg the administration wants to purchase more oil than the ~15 million barrels it has the budget for. And you know what, in any semi-meritocratic fund, if a portfolio manager were running this hot, they’d be given a ton more risk capital to work with.

Not to mention that commodity prices just hit their lowest levels of 2024.

Give the man more money!