The US is “playing with fire” as oil reserves fall to a 40-year low, says market guru Larry McDonald

• The US is “playing with fire” as its oil reserves fall to a 40-year low while crude oil prices soar, Larry McDonald warned in a post on X.

• “Uneasy indeed…,” the market guru wrote in an earlier post highlighting the decline in US strategic petroleum reserves.

• The Biden administration has withdrawn the SPR to cap energy prices since the start of the Ukraine war.

It is the USA “playing with fire” As its oil reserves fall to a 40-year low while global crude oil prices are rising again, market guru Larry McDonald said.

The founder of The Bear Traps Report used X, formerly known as Twitter, to warn about the sharp decline in U.S. oil supplies.

“Uneasy indeed…” he wrote in one previous post with a graph showing a sharp decline in US strategic petroleum reserves. McDonald is a former Lehman Brothers trader and author of “A Colossal Failure of Common Sense,” in which he describes how the investment bank collapsed in September 2008, triggering a global financial crisis.

The collapse in oil supplies highlights the growing risks to America’s energy security. Low domestic reserves could increase U.S. dependence on imports, potentially making it more vulnerable to supply disruptions and price volatility in the global oil market.

McDonald doubled down on his warning in his recent post, pitting declining U.S. oil inventories against rising Brent oil prices. The international crude oil benchmark has been rising in recent months, rising nearly 30% since the end of May.

Oil prices have risen as the world’s top oil producers, including Saudi Arabia and Russia, extend production cuts announced earlier this year to ensure price stability.

After the Ukraine War broke out in early 2022, the US government used its Strategist Petroleum Reserve (SPR) as a reserve largest buffer against global energy price volatility. Last year, 180 million barrels were released from the SPR to hedge against high oil prices and curb decades of inflation.

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While the Biden administration plans to replenish the SPR, the amount of barrels remaining in the reserve is currently less than half of the all-time high reached in 2010.

As oil prices rise, the situation will only increase inflationary pressures in the US and potentially force the Federal Reserve to keep interest rates high for longer.

Read the original article Business Insider