Oil Executives Warn of SPR Drawdown Risks and Slow Export Recovery
The latest energy survey by the US Federal Reserve Bank of Dallas highlights the ongoing impact of the 7-month conflict between the US and Iran on the oil and gas sector. Executives were asked about the US Strategic Petroleum Reserve (SPR), Persian Gulf crude exports, and year-end oil prices. Regarding the SPR, 31% of respondents believe the reserve could be drawn down to between 100 million and 150 million barrels before reaching a critical low. Another 21% estimate the threshold at 50 million to 100 million barrels, while 19% think the SPR may already be approaching its operational minimum.
The SPR has been depleted since the conflict began on 28 February, with the US releasing oil to counter rising fuel prices. As of late September, the reserve held 283.7 million barrels, its lowest level since 1982. The drawdown is part of a coordinated emergency release involving 32 member countries of the International Energy Agency, with the US committed to releasing up to 172 million barrels. The US Department of Energy has structured an exchange program to return oil to the SPR without fully burdening taxpayers.
On Persian Gulf crude exports, 7% of respondents expect a return to prewar levels by year-end. The largest group (28%) forecasts a recovery by the second quarter of 2027, while 26% anticipate normalization in the second half of next year. Some executives expressed skepticism, with one noting the conflict may last longer than expected and another questioning whether exports will ever return to normal levels.
Regarding oil prices, 49% of executives predict West Texas Intermediate (WTI) crude will settle between $80 and $89.99 per barrel by year-end. Another 25% expect prices to range between $90 and $99.99, while 10% forecast prices exceeding $100 per barrel. The survey also revealed that free cash flow has increased across much of the US upstream sector, with large producers more likely to return cash to shareholders, while smaller firms focus on capital spending and debt reduction.