On the 29th, the U.S. Department of Energy’s Office of Petroleum Reserves issued a solicitation to release up to 40 million barrels of crude oil into the market through an exchange mechanism.

Regarding the physical market, this release of up to 40 million barrels via exchange will increase short-term spot supply, exerting significant downward pressure on spot prices. In the futures market, expectations of looser short-term supply are rising, which will weigh on the performance of near-month crude oil contracts; however, the exchange mechanism implies a future need to replenish strategic reserves, limiting the long-term impact. Overall, the move is viewed as moderately bearish.

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