DOE awards contracts for 26 million barrels of crude from latest US SPR sale

Six companies were awarded contracts to purchase crude from the US Strategic Petroleum Reserve in a competitive sale scheduled as part of a planned drawdown for fiscal 2023 mandated by Congress to pay for certain legislative measures, the Department of Energy announced March 9.

The DOE said that 11 companies submitted 119 bids for oil from the government stockpile following a Feb. 13 notice of sale.

From those bids, Marathon Petroleum Supply and Trading will take 8.4 million barrels, while Equinor Marketing & Trading was awarded 7.3 million barrels and Shell Trading won 3.6 million barrels. Another 3.5 million barrels will go to Aramco Trading Americas. Macquarie Commodities Trading and Phillips 66 will each take 1.6 million barrels.

Delivery of the barrels of sweet crude is scheduled between April 1 and June 30 from SPR sites in Big Hill in Texas and from West Hackberry in Louisiana.

The department last year completed the largest-ever drawdown from the reserve, satisfying President Joe Biden's historic commitment to release 180 million barrels to combat energy price hikes spurred by Russia's invasion of Ukraine.

The new awards fulfill the last congressionally mandated sale until fiscal 2026 as all 26 million barrels were sold, and the proceeds will be deposited to the US Treasury by the end of the fiscal year, the DOE said.

An omnibus appropriations package passed by Congress in December cancelled 140 million barrels of congressionally mandated SPR sales that were to take place between fiscal years 2024 and 2027. The DOE had sought the cancellations to give it more flexibility as it looks to prioritize replenishing the SPR, and they were carried out by transferring billions in revenue from the 180 million-barrel drawdown to congressional coffers.

"This action strategically maintains volume SPR at a price of about $74/b by avoiding unnecessary sales," the DOE said.

The department said it will now turn its attention to replenishing the SPR, with a focus on securing "the best deal for taxpayers by aiming to repurchase crude at a lower price than it was sold for, while providing certainty to the industry in a way that helps encourage near-term production."

The department added that its long-term approach to replenishing the SPR involves a three-part strategy: "direct repurchases with revenues from emergency sales; exchange returns that include a premium to volume delivered; and securing legislative solutions that avoid unnecessary sales unrelated to supply disruptions to strategically maintain volume."

The DOE opted not to accept any offers it received as part of its first solicitation to repurchase up to 3 million barrels of sour crude to begin refilling the SPR, indicating that bids it received did not meet the crude specifications and price it was looking for.