US to buy 3 mn barrels of crude oil to replenish reserve in August

The announcement sent US oil futures 0.5% higher to trade above $71 a barrel.

US Strategic Petroleum Reserve

Photo: Bloomberg

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By Jennifer Jacobs and Ari Natter

The US is soliciting bids for up to 3 million barrels of sour crude oil to refill its depleted Strategic Petroleum Reserve. 
Deliveries into the emergency government stockpile are planned for August, with awards to be announced in June, the Energy Department said in its solicitation Monday. The move marks the agency’s second attempt to begin replenishing the Strategic Petroleum Reserve after it released more than 200 million barrels last year, in part to curb high energy prices. 

The announcement sent US oil futures 0.5% higher to trade above $71 a barrel. 
Oil traders have been closely watching for any indication that the government would begin refilling the reserve, as its purchases are bound to tighten the market. The sour crude grades sought by the Energy Department are already in high demand as OPEC+ cuts output. Any additional pull on domestic barrels could send oil prices higher, potentially raising gasoline prices in the middle of the summer driving season. 

The Energy Department said in a statement that it plans to “repurchase crude at a lower price than the average of about $95 per barrel it was sold for in 2022, while strengthening energy security by providing certainty to the industry in a way that helps encourage near-term supply.” The department added that it plans to purchase more oil later this year.
The Biden administration last fall said the aim was to refill the reserve when prices were at or below about $67-$72 per barrel. 

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A prior attempt to refill the stockpile via another 3 million-barrel purchase, was canceled by the Energy Department in January, after the agency said offers it received were either too expensive or didn’t meet other specifications.
In addition to direct purchases, the agency has said part of its strategy for refilling the reserve includes a return of oil from previous exchanges, and avoiding “unnecessary sales unrelated to supply disruptions.” The department successfully canceled some 140 million barrels of oil sales mandated by Congress last year.

The reserve currently holds nearly 360 million barrels of oil, about half of its total capacity, according to Energy Department data.
Granholm has said the administration wants to refill the oil reserve amid criticism from Republicans who have accused the White House of using the emergency supplies to combat soaring gasoline prices prior to last year’s midterm elections.

First Published: May 16 2023 | 9:49 AM IST

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