US Department of Energy to Purchase Oil for Strategic Petroleum Reserve
US Department of Energy Seeks to Replenish Strategic Petroleum Reserve
The U.S. Department of Energy has announced its intention to buy up to 3 million barrels of oil for the Strategic Petroleum Reserve (SPR) for delivery in March 2024. This move comes as the department aims to take advantage of lower prices to start replenishing the stockpile.
Administration’s Response to Previous Oil Price Rally
Following Russia’s war on Ukraine in February 2022, the administration of President Joe Biden conducted the largest sale to date from the SPR, selling 180 million barrels in an attempt to limit an oil price rally. This sale was a response to the global geopolitical situation and its impact on oil prices.
Criteria for Oil Purchase
The Energy Department has set a price cap of $79 per barrel for the oil it plans to repurchase for the reserve. This decision follows last year’s emergency sales, during which the department received an average of about $95 a barrel. The department intends to release monthly offers to buy crude for the emergency stash through May next year.
Details of the Solicitation
The new solicitation is specifically for sour crude, and the delivery will be received by the Big Hill SPR site in Texas. This move indicates a strategic focus on acquiring specific types of crude oil for the reserve.
Progress in Reserve Replenishment
To date, the department has bought back nearly 9 million barrels for the reserve at about $75 a barrel. Additionally, it has secured the return of nearly 4 million barrels by February, several months ahead of schedule, from a previous exchange with oil companies.
Maintenance and Current Status of the Reserve
Department officials have noted that the return of oil is being tempered by planned life extension maintenance at the SPR, where oil is held in hollowed-out salt caverns on the Texas and Louisiana coasts. The reserve currently holds 351.9 million barrels of oil, emphasizing the ongoing efforts to manage and maintain the reserve’s infrastructure.
