US Accelerates Strategic Petroleum Reserve Purchases as Oil Prices Fall – Reuters

By Timothy Gardner

WASHINGTON – The Biden administration announced on Friday an increase in purchases to replenish the Strategic Petroleum Reserve (SPR) following a significant sale from the stockpile last year.

The Department of Energy has issued two solicitations to acquire a total of 6 million barrels of crude oil for delivery to its Bayou Choctaw facility in Louisiana, with deliveries scheduled from September through December.

If these solicitations, along with previously communicated ones, are met, the department’s purchasing rate will rise to approximately 4.5 million barrels per month for September, October, and November, an increase from the current rate of about 3 million barrels.

In an exclusive interview earlier this week, Energy Secretary Jennifer Granholm indicated that the department could accelerate the replenishment of the SPR this year. The reserve is stored at four locations on the coasts of Texas and Louisiana, with two of these sites undergoing maintenance, which has delayed purchases.

“All four sites will be back up by the end of the year, so one could imagine that pace would pick up, depending on the market,” Granholm stated.

Last year, the Biden administration initiated a record sale of 180 million barrels from the SPR in response to rising gasoline prices, which soared above $5.00 per gallon following Russia’s invasion of Ukraine. This decision reduced the reserve to its lowest level in four decades.

The Department of Energy aims to explore additional avenues for replenishing the reserve based on market conditions, seeking to purchase oil for the reserve at approximately $79 a barrel. West Texas Intermediate crude futures were trading lower at around $75 per barrel on Friday, experiencing a decline for the third consecutive week amid concerns about demand.

“At a time of relative crude weakness, the department is adding 50,000 barrels per day to SPR demand,” raising the total to 150,000 barrels per day for the reserve, which is comparable to the demand of a medium-sized U.S. refinery, according to Kevin Book, an analyst at ClearView Energy Partners.

This year, the Department of Energy shifted to a direct purchase strategy for oil for the reserve, moving away from price indexing. This change, along with the completion of maintenance at Bayou Choctaw, has enabled the department to acquire 38.6 million barrels of oil at an average price of $77 per barrel.