US to offer fixed price contracts to refill SPR

Market: Crude oil
26/07/22

US president Joe Biden's administration plans to offer fixed-priced contracts to refill the Strategic Petroleum Reserve (SPR) after 2023 in a bid to encourage US oil companies to bring more production online.

The Department of Energy, which manages the SPR, is launching a rule-making process this week so that it can buy crude to refill the SPR through a competitive fixed-price bid process for future deliveries. Under the current rule, the department can purchase crude for future delivery, but under an index-based bidding process, with the final crude sale prices adjusted based on index prices close to the time of delivery.

The new method "can provide both certainty to industry that there is stable demand for increased production they're bringing online right now, while also providing certainty to the government that SPR has been replenished in a fair fixed price," a senior administration official said today.

The administration plans to call for bids this autumn for companies to sell it 60mn bl of crude to inject into the SPR, energy secretary Jennifer Granholm said in May. The bids are meant for delivery well after the end of fiscal year 2023 — 30 September 2023 — so as not to strain the current tight markets.

For now, the US continues to draw down strategic stocks at unprecedented rates in a bid to bring down oil prices that started rising last year concurrently with the global rebound from the Covid-19 pandemic. The oil price increased by a third since Russia's invasion of Ukraine began on concern about the security of more than 7mn b/d of Russian crude and product exports.

Biden in March ordered 180mn bl to be released from the SPR in May-October as a "war time bridge" to shore up supplies until domestic producers have time to ramp up production later this year. Of that amount, 125mn bl already has been sold and 70mn bl has been delivered, another official said.

The Department of Energy, as part of the same drawdown, offered another 20mn bl from SPR today. The government agency plans to offer up to 2.8mn bl of sour crude and 17.2mn bl of sweet crude with deliveries from 16 September-21 October.

The upcoming sale will offer up to 7.6mn bl of crude from the Big Hill site in Texas, up to 9.6mn bl of sour crude from the West Hackberry site in Louisiana and up to 2.8mn bl of sour crude from the Bryan Mound SPR site in Texas.

US SPR inventory was 474.5mn bl as of 22 July, down by 119mn bl so far this year.

An analysis by the Treasury Department released today suggests that the drawdown of US strategic reserves, together with similar actions by other IEA members, could have shaved up to 42¢/USG from US retail gasoline prices.

The Biden administration has been keen to take credit for recent declines in US average retail gasoline prices after they hit an all time record, in nominal dollar terms, of $5.01/USG last month. That price averaged $4.33/USG in the week ended 25 July, Energy Information Administration data show.

"The current drop in gas prices remains one of the fastest declines in over a decade," the White House said last week. This week's US retail gasoline average price is still 38pc higher than a year earlier.

By Haik Gugarats

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20/12/24

US House votes to avert government shutdown

Washington, 20 December (Argus) — The US House of Representatives voted overwhelmingly today to extend funding for US federal government agencies and avoid a partial government shutdown. The Republican-controlled House, by a 366-34 vote, approved a measure that would maintain funding for the government at current levels until 14 March, deliver $10bn in agricultural aid and provide $100bn in disaster relief. Its passage was in doubt until voting began in the House at 5pm ET, following a chaotic intervention two days earlier by president-elect Donald Trump and his allies, including Tesla chief executive Elon Musk. The Democratic-led Senate is expected to approve the measure, and President Joe Biden has promised to sign it. Trump and Musk on 18 December derailed a spending deal House speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump lobbied for a more streamlined version that would have suspended the ceiling on federal debt until 30 January 2027. But that version of the bill failed in the House on Thursday, because of opposition from 38 Republicans who bucked the preference of their party leader. Trump and Musk opposed the bipartisan spending package, contending that it would fund Democratic priorities, such as rebuilding the collapsed Francis Scott Key Bridge in Baltimore, Maryland. But doing away with that bill killed many other initiatives that his party members have advanced, including a provision authorizing year-round 15pc ethanol gasoline (E15) sales. Depending on the timing of the Senate action and the presidential signature, funding for US government agencies could lapse briefly beginning on Saturday. Key US agencies tasked with energy sector regulatory oversight and permitting activities have indicated that a brief shutdown would not significantly interfere with their operations. But the episode previews potential legislative disarray when Republicans take full control of Congress on 3 January and Trump returns to the White House on 20 January. Extending government funding beyond 14 March is likely to feature as an element in the Republicans' attempts to extend corporate tax cuts set to expire at the end of 2025, which is a key priority for Trump. The Republicans will have a 53-47 majority in the Senate next month, but their hold on the House will be even narrower than this year, at 219-215 initially. Trump has picked two House Republican members to serve in his administration, so the House Republican majority could briefly drop to 217-215 just as funding for the government would expire in mid-March. Congress will separately have to tackle the issue of raising the debt limit. Conservative advocacy group Economic Policy Innovation Center projects that US borrowing could reach that limit as early as June. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US government agencies set to shut down

20/12/24

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20/12/24

US government agencies set to shut down

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Viewpoint: More changes for Dated crude benchmark ahead

20/12/24

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20/12/24

Viewpoint: More changes for Dated crude benchmark ahead

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Trump backs new deal to avoid shutdown: Update

19/12/24

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19/12/24

Trump backs new deal to avoid shutdown: Update

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US Congress passes waterways bill

19/12/24

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19/12/24

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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