President Joe Biden's administration has delayed by roughly a year the return of more than 8mn bl of crude borrowed from the US Strategic Petroleum Reserve (SPR).
The delays were approved as recently as last week, when the US Energy Department revised two "exchange" contracts it negotiated with Shell, delaying the return of 3.6mn bl of crude to the SPR until 2025. The administration last year separately revised four other contracts, delaying the return of nearly 4.5mn bl of crude initially planned to be returned to the SPR from 2022-24.
The contract revisions, obtained through the Freedom of Information Act, appear at odds with remarks by US energy secretary Jennifer Granholm, who earlier this year said the administration wants to "accelerate" the return of crude exchanges as part of a three-part strategy to partially refill the SPR. With 371.6mn bl of crude in inventory, the reserve is currently at its lowest level in nearly 40 years.
One part of the administration's strategy to refill the SPR "is to accelerate some of the exchanges that were announced before to get those back in," Granholm told reporters at the White House on 23 January.
Oil companies and traders borrowed more than 27.4mn bl of crude from the SPR between September 2021 and June 2022, most under a program Biden created in hopes of bringing down gasoline prices. Under the initial contracts, companies were required to return most of the crude by 2024, along with an in-kind "premium" set at 2.3-14.6pc of the volume they borrowed.
But rather than "accelerate" the return of oil to the SPR, the Energy Department has repeatedly sought to delay the return of crude, according to nearly two dozen contracts and contract modifications obtained by Argus under public records requests.
The Energy Department failed to respond to repeated requests for clarification on Granholm's remarks.
The Energy Department renegotiated three of the exchange contracts in February 2022, in the weeks before Russia's invasion of Ukraine caused global oil prices to rise. Contract revisions for ExxonMobil and TotalEnergies delayed the return of 3.5mn bl of crude that was set to be returned that year. ExxonMobil declined to comment. TotalEnergies did not respond to a request for comment.
The Energy Department followed up in August by revising another exchange contract with Chevron that delayed by more than a year the return of 939,000 bl that had been scheduled for this September. The final contract revision, reached with Shell on 8 March, delayed the return of 3.6mn bl of crude by 11 months until July to August of 2025. Neither company responded to a request for comment.
The 8mn bl remains relatively small compared with the 180mn bl of crude withdrawn from the SPR last year as part of emergency sales, or an upcoming 26mn bl drawdown scheduled for delivery on 1 April-30 June. Republicans have criticized the SPR drawdowns and question whether the administration has a cohesive plan to refill the emergency stocks.
The SPR could be refilled on a faster timetable if the White House follows through with plans to purchase crude outright at a targeted price of $67-$72/bl. Nymex WTI crude futures for delivery in April settled at $67.61/bl on Wednesday.
