The US Department of Energy (DOE) has opened a tender for the supply of six million barrels of locally produced oil to be deposited in the Strategic Petroleum Reserve (SPR).
The offer, made in an invitation to suppliers on Friday, follows the award of contracts earlier in the week in another purchase to replenish the SPR after war-induced releases. The contracts for 3.2 million barrels of domestically produced crude, bought for more than $230 million, fulfilled the invitation that the DOE made last month, when it also awarded contracts for three million barrels.
The last invitation closes on July 19 and deliveries must be made in October and November.
These receipts and contracts awarded since June must be injected into the Big Hill SPR storage site in Jefferson County, Texas.
“Today’s announcement advances the President’s replenishment strategy following his historic release of the SPR to address the significant global supply disruption caused by Putin’s war in Ukraine,” the DOE said in a statement press
The government can only tap into the reserve during severe supply disruptions, as mandated by the Energy Conservation and Policy Act.
Since the withdrawals caused by the conflict, the SPR should accommodate more than 160 million barrels in replacement volume, according to Energy Secretary Jennifer Granholm, speaking during an interview at the Global Energy Summit in Columbia on April 12.
President Joe Biden announced in March 2022 an SPR drawdown of one million barrels per day over the next six months, totaling 180 million barrels.
The Treasury Department reported on July 26 that the results of its analysis showed that SPR launches and coordinated launches with International Energy Agency countries had reduced gasoline prices by 17 to 42 cents
Global oil benchmark West Texas Intermediate (WTI) fell gradually after holding steady above $100 a barrel in March 2022, a month after Russia invaded Ukraine, until July 2022, data showed from the US Energy Information Administration (EIA). WTI prices peaked last year in June at a 12-year high of $114.84. WTI settled at $76.44 at the end of 2022.
Brent also stayed above $100 a barrel from March 2022 to August 2022 before easing to $80.92 by the end of the year, according to EIA data. Brent prices last year also peaked in June at an eight-year high of $122.71.
“DOE will pursue additional buyback opportunities as market conditions permit,” the department said.
In addition to the purchases, the DOE has also been seeking exchange returns and “legislative solutions that prevent unnecessary sales unrelated to supply disruptions.”
It has succeeded in canceling 140 million barrels of sales ordered by Congress for 2024-27.
In March, the agency awarded SPR sales for its annual obligation to parliament for 2023, amounting to 26 million barrels.
“This will be the last sale ordered by Congress until FY26 [fiscal year 2026]” the DOE said on March 9. “Congress accepted a DOE proposal that canceled 140 million barrels in congressionally mandated sales that took place between FY24 and FY27.
“This action strategically keeps SPR volume at ~$74 a barrel by avoiding unnecessary selling.”
At the end of June, the SPR fell further to 347.159 million barrels, nearly 1.46 million barrels less than the previous week, when the stockpile fell to its lowest level since August 1983, according to EIA data.
The SPR had net withdrawals of 280,000 bpd in the second quarter, according to the EIA’s short-term outlook released on June 6.
But the DOE said in Friday’s announcement, “The SPR remains the world’s largest emergency crude supply.”
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