The US is preparing to buy up to 3 million barrels of sour crude oil to begin refilling its depleted Strategic Petroleum Reserve, according to people familiar with the matter.
After selling more than 200 million barrels from the emergency stockpile last year, in part to curb high energy prices, the Energy Department plans to solicit offers to replenish the reserve, which has fallen to the lowest level since 1983.
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 cancelled some 140 million barrels of oil sales mandated by Congress.
Last week, US Energy Secretary Jennifer Granholm said the government would repurchase crude oil for the reserve after a congressionally mandated drawdown ends in June.
An earlier attempt to refill the reserve, via another 3 million barrel-purchase, was canceled by the Energy Department in January, saying the offers it received were either too expensive or didn’t meet other specifications.
The Biden administration last Fall said the aim was to refill the reserve when prices were at or below about $67-$72 per barrel.
Oil prices have found support on expectations that the US will purchase crude for the reserve. Worries about a recession and its effects on oil consumption have weighed heavily on the market, bringing prices to the government’s targeted levels.
The sour crude grades that the government is aiming to purchase are already in high demand amid output cuts from producer group OPEC+ and the start up of new refining capacity that process such grades.
--With assistance from Devika Krishna Kumar.
