US speeds up purchasing for Strategic Petroleum Reserve as oil prices dip

4:20 pm Friday, June 07th, 2024

By Timothy Gardner

WASHINGTON (Reuters) -President Joe Biden’s administration said on Friday it has increased purchasing of crude oil to replenish the Strategic Petroleum Reserve following its historic sale from the stockpile in 2022.

The Department of Energy on Friday issued two solicitations to buy a combined 6 million barrels of crude for delivery to its Bayou Choctaw site in Louisiana from September through December.

If those offers and previously announced ones are fulfilled, the department’s purchasing rate would increase to about 4.5 million barrels per month for September, October and November from about 3 million barrels now.

Energy Secretary Jennifer Granholm said in an exclusive interview on Tuesday that the department could speed replenishment of the SPR this year.

The SPR is stored at four sites on the coasts of Texas and Louisiana, and two of those have been undergoing maintenance, slowing 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 said.

The Biden administration in 2022 announced a record sale of 180 million barrels from the SPR after Russia’s invasion of Ukraine. The move was an effort to control gasoline prices that spiked to more than $5.00 a gallon. But it also reduced the SPR to the lowest in 40 years.

The department said it will look for more ways to replenish the reserve, depending on the market. The DOE wants to buy oil for the reserve at about $79 a barrel. West Texas Intermediate crude futures were well below that at about $75 on Friday, falling for a third straight week on concerns about demand.

“At a time of relative crude weakness, the department is adding 50,000 barrels per day to SPR demand,” to 150,000 bpd for the reserve, equal to about the demand of a medium-size U.S. refinery, said Kevin Book, an analyst at ClearView Energy Partners.

The DOE this year moved to a direct purchase strategy of oil for the reserve instead of basing the purchasing price on an index. That and the completion of maintenance at Bayou Choctaw has helped it buy 38.6 million barrels of oil at an average of $77 per barrel, it said.

(Reporting by Timothy Gardner; Editing by Marguerita Choy and Cynthia Osterman)