US DOE continues SPR refill with 3.2-million-barrel purchase of crude

The US Department of Energy June 30 said it has awarded contracts to four companies for the purchase of a combined 3.2 million barrels of crude to continue refilling the Strategic Petroleum Reserve.

The DOE said that nine companies submitted 28 proposals in response to its June 9 solicitation and that the purchase was fully subscribed.

The winning proposals came from Macquarie Commodities Trading US for 1.5 million barrels; Shell Trading and Sunoco Partners Marketing & Terminals for 600,000 barrels each; and Atlantic Trading & Marketing, which will provide 500,000 barrels.

Delivery of the oil is scheduled Sept. 1-30 to the Big Hill SPR storage site in Texas.

The DOE last year completed the largest-ever drawdown from the SPR, selling 180 million barrels of oil over several months at an average price of $95/b, to combat energy price hikes spurred by Russia's invasion of Ukraine. The department has committed to buying back oil at a lower price to make a return for taxpayers and has thus far managed to close contracts averaging more than $20/b below the price of the SPR releases.

The 3.2 million barrels headed to the SPR in September garnered an average price tag of $71.98/b, the DOE said. And the previously announced purchase of 3 million barrels for delivery in August was acquired at an average price of about $73/b.

The DOE said it planned to announce another request for proposals for the purchase of crude for delivery in October and November July 7.

Crude volumes at the SPR stood at 348.6 million barrels the week ended June 23, according to the Energy Information Administration, the lowest level since August 1983.

DOE in October laid out a plan for repurchasing crude to replenish the emergency stockpile when WTI crude oil was at or below $67-$72/b. Its long-term approach to the SPR refill 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."

Through the omnibus spending bill that funds the government through fiscal 2023, Congress canceled 140 million barrels of Congressionally mandated SPR sales that were to take place between fiscal years 2024 and 2027. DOE requested the move to give it more flexibility as it looks to prioritize replenishing the SPR. It was carried out by transferring billions in revenue from the 180-million-barrel drawdown to congressional coffers.

The DOE has maintained that the SPR continues to be the world's largest supply of emergency crude supplies and even at current volumes can respond to energy security needs.