US crude loans to mostly return to SPR in 2024

Oil companies contracted to borrow up to 21.7mn bl of crude from the US Strategic Petroleum Reserve (SPR) are set to return 94pc of those volumes over a four-month period in 2024, according to recently obtained contracts.

President Joe Biden created that crude "exchange" program last November, offering the industry the ability to take long-term loans of up to 32mn bl from the four SPR's storage site in Louisiana and Texas. The White House weeks later partly credited the program for a 10¢/USG decline in gasoline prices, which in mid-December averaged $3.32/USG.

The administration has already identified the nine companies participating in the SPR program. But newly released contracts, which Argus obtained under the Freedom of Information Act, offer more details about when crude is required to be withdrawn and returned to the SPR. That information could have new relevance, as tensions between Russia and Ukraine have led Biden to consider authorizing an additional release of crude from the SPR.

"That is certainly an option on the table," the White House said today of future SPR releases.

SPR crude withdrawals under the exchange program are set to continue up until 30 June, the contracts show. The trading firms Trafigura and Macquarie Commodities are set to withdraw a total of 5mn bl from 1 May-30 June, while Phillips 66 will receive 2.3mn bl in June, according to the contracts. Shell is also contracted to withdraw 4mn bl in April and 200,000 bl in May. Other companies still contracted to withdraw SPR crude include Chevron, ExxonMobil and BP.

ExxonMobil, Shell, Trafigura, Marathon, Phillips 66, Macquarie and BP are contracted to return up to 20.4mn bl of crude they are borrowing to the SPR between 1 June-30 September, 2024, plus a premium of up to 489,000 bl as payment. Chevron and TotalEnergies plan to return the 1.3mn bl of crude they are borrowing in September 2022 and September 2023, respectively, plus a total premium of 63,000 bl.

The SPR as of 18 February held 582.4mn bl of crude, according to federal data. If the companies participating in the program receive all of their contracted crude, the SPR will receive 1.8mn bl of in-kind crude payments when it finishes 30 September 2024. The average premium payment for the long-term crude loans will be equivalent to 8.5pc of the borrowed amount, according to to the contracts.

By Chris Knight

SPR exchange crude flows, by month mn bl