President Joe Biden's administration said it plans to start refilling the US Strategic Petroleum Reserve (SPR) by accelerating the return of some of the 24.4mn bl of crude it loaned out last year.
ExxonMobil, Shell, Chevron and Phillips 66 were among the companies that took long-term loans of crude from the SPR as part of an "exchange" program meant to lower fuel prices. Nearly all of that crude had been scheduled to return to the SPR over a four-month period beginning on 1 June 2024, according to contracts obtained by Argus Media.
US energy secretary Jennifer Granholm said the administration had a strategy to begin refilling the SPR that would "accelerate" the return of some of the loaned out crude. The SPR is currently at its lowest levels in nearly 40 years, but still has 371.6mn of crude in inventory.
"I have no concerns that we will be able to refill and replenish the SPR, and do it at a savings to taxpayers," Granholm said today.
The US Energy Department did not respond to requests for details on when crude would return to the SPR, or the volume of borrowed crude set to be returned on an accelerated timetable.
Biden announced the exchange program in November 2021, marking an effort to combat rising fuel prices by offering loans of crude from the SPR. At one point when the program was open to bidding, prompt-month Nymex WTI crude futures were $19/bl more than futures prices at the end of the program in September 2024.
Under the terms of the SPR exchange contracts, companies were able to select a "return period" that required them to return crude loans over a period ranging from 3-33 months. As payment for the loan, companies had agreed to return 2.3-9.1pc more crude than they borrowed from the SPR.
Of an initial 21.7mn bl of crude loaned from the SPR, 20.4mn bl was contracted to be returned between 1 June 2024 and 30 September, according to contracts obtained through a public records record. If the existing contracts remain intact, companies will also have to add a total of nearly 1.8mn bl of additional crude to the SPR as payment for the loans.
Beyond accelerating the return of crude loans, the administration is also working on a plan to buy 60mn bl of crude for the SPR at a targeted price of $67-72/bl, using revenue from last year's emergency sale of 180mn bl at an average price of $96/bl. The Energy Department earlier this month called off a "pilot" purchase of up to 3mn bl of crude because it said the offers were too high. Granholm said the administration planned to announce soon a plan for the crude purchases.
