US DOE seeks to buy 3.5 million barrels of crude for delivery to SPR in January 2025

The US Department of Energy plans to buy 3.5 million barrels of crude for the Strategic Petroleum Reserve, executing the Biden administration's strategy to continue with solicitations when oil prices fall to $79/b or less, the DOE said Aug. 6.

The announcement comes just a week after the DOE finalized a purchase of 4.65 million barrels of sour crude that marked the completion of the administration's promise to return the 180 million barrels released from the emergency crude stockpile in 2022 to combat energy price hikes spurred by Russia's invasion of Ukraine.

"These continued purchases underpin the president's commitment to safeguard and replenish this critical energy security asset," the DOE said in a statement announcing two new solicitations.

The first solicitation seeks up to 1.5 million barrels of sour crude for delivery in January 2025 to the recently renovated Bayou Choctaw site in Louisiana. Bids of no higher than $79.99/b and of at least 250,000 barrels are due by 11 am CT Aug. 13, and contracts will be awarded no later than Aug. 29, according to the solicitation.

The DOE said a second solicitation will be issued Aug. 12 for the purchase of about 2 million barrels. Those barrels will also be for January 2025 delivery but will go to the Bryan Mound site in Texas which is reopening after significant construction tied to the maintenance of the SPR. Bids will be due by 11 am CT Aug. 20.

Crude volumes at the SPR stood at 375.1 million barrels the week ended July 26, compared with the 638 million barrels of crude when President Joe Biden took office in January 2021, according to the US Energy Information Administration.

The Biden administration's three-part SPR replenishment strategy has centered on "direct purchases with revenues from emergency sales, exchange returns that include a premium of oil above the volume delivered, and securing legislative solutions that avoid unnecessary sales unrelated to supply disruptions," the DOE said.

The new solicitations build on direct purchases made in 2023 and 2024 totaling more than 43 million barrels for an average price of $77/b.

"DOE continues to aim for $79/b or less, significantly lower than the average of about $95/b DOE received for 2022 emergency SPR sales," the department said. "DOE will continue to evaluate options to refill the SPR while securing a good deal for taxpayers, taking into account planned exchange returns and market developments."

NYMEX September WTI settled 58 cents lower at $72.94/b Aug. 5 as traders weighed recession fears and downward pressure from steep selloffs in global financial markets against mounting geopolitical risks to supply.

Crude futures moved higher in early New York trading Aug. 6 on the back of expectations of a disruption in supply from the sudden reduction in Libya's Sharara oilfield production and concerns of further escalation between Israel and Iran. At 1507 GMT, NYMEX September WTI was up 66 cents at $73.60/b.