In a Thursday note, Goldman Sachs said it believes the Biden administration’s plan to release more stocks from the Strategic Petroleum Reserve “as appropriate,” to try and drive oil prices down, poses only a small downside to current price levels

On Wednesday the administration announced it planned to sell 15 million barrels (mb) of crude from the Strategic Reserve by the end of the year. The decision came after OPEC+ announced a major 2 million barrel per day cut to production quotas in an effort to support prices as lagging Chinese demand and demand destruction have driven prices down of late.

The announcement has had little effect so far. Official US data shows the Strategic Petroleum Reserve has dropped to the lowest level since mid-1984, while at the same time, commercial oil stocks have fallen as well.

Goldman’s note said, “We find incremental SPR sales as the most likely action (16 mb is available from FY2023 Congressionally mandated sales), although this remains price dependent… Such a release is likely to have only a modest influence (<$5/bbl) on oil prices however.”

Goldman noted retail gasoline prices should be higher than present levels to warrant such a release. The bank predicted that the threshold will shift higher significantly toward $125/barrel crude and $5/gallon gasoline once the 2022 midterm elections in the US have been held, and temporarily lowering oil prices is no longer politically expedient for those in power.

This month Goldman had raised its 2022 Brent Crude price forecast to $104 per barrel, and the 2023 forecast to $110 per barrel. It noted the 2 million bpd cut by OPEC+ would be, “very bullish” for prices.