The US is unlikely to take advantage of a recent drop in prices to start buying crude for the US Strategic Petroleum Reserve (SPR) this year, US energy secretary Jennifer Granholm said today.
President Joe Biden last year laid out plans to buy crude to start refilling the SPR whenever spot prices were below $72/bl. But a pending drawdown from the SPR and ongoing maintenance at two storage facilities are posing obstacles to start executing the crude purchase plan this year.
"This year it will be difficult for us to take advantage of this low price," Granholm said in testimony on Capitol Hill today. "But we will continue to look for that low price into the future."
Nymex WTI prompt crude futures settled at a 15-month low of $66.61/bl on 17 March, and prompt futures today were trading around $70/bl. Those prices are well below Biden's targeted price, but administration officials say SPR facilities are already tied up handling a congressionally mandated sale of 26mn bl that is set for delivery from 1 April to 30 June.
Granholm said another challenge to starting crude purchases this year is that two SPR facilities — the Bayou Choctaw site in Louisiana and Bryan Mound storage site in Texas — are "down for maintenance."
The SPR currently holds 371.6mn bl at four storage sites in Texas and Louisiana, the lowest level in nearly 40 years. The Biden administration intends to purchase crude using the remaining $4.5bn it has left from the emergency sale last year of 180mn bl from the SPR. Most of the sale revenue went toward a deal to cancel earlier congressional mandates to sell 140mn bl of crude from the SPR by fiscal year 2027.
The Biden administration has said its intended crude purchase price of $67-72/bl will be a good deal for taxpayers because the US earned an average of $95/bl for last year's emergency crude sales. The crude purchases will also provide support for domestic producers, administration officials said.
Even if no crude purchases happen this year, the SPR could still begin partially refilling this summer. ExxonMobil has been scheduled to return more than 3mn bl of crude it borrowed from the SPR in the wake of Hurricane Ida in 2021, according to contracts obtained through a public records request.
Granholm said the administration wants to refill the SPR back to the level it would have been without the emergency sales within "a few years," which suggests that 40mn bl may be added to the SPR after accounting for the 140mn bl of canceled crude sales. Another official at the Energy Department earlier this month said the administration wants to start buying "within the next year."
