US to buy another 6mn bl of crude for SPR

President Joe Biden's administration is seeking to purchase an additional 6mn bl of sour crude for delivery to the US Strategic Petroleum Reserve (SPR) in October and November.

The pending crude purchase, set for delivery to the Bill Hill SPR site in Texas, is part of a plan by the Biden administration to partially refill the emergency reserve, which is at its lowest level in 40 years as a result of emergency drawdowns last year and congressionally mandated sales that started in 2017. The SPR held 347.2mn bl of crude as of last week, down from 638mn bl in January 2021.

The US Energy Department has already bought 6.3mn bl of US-produced sour crude for delivery to the Big Hill site starting in August and September as part of a "replenishment strategy" for the SPR, which consists of four facilities in Texas and Louisiana. The US may purchase up to 13mn bl of crude by the end of this year, administration officials have said.

Bids for the crude purchase solicitation are due by 11am ET on 19 July. The sour crude must be produced in the US and delivered to the SPR from 1 October to 30 November.

The Biden administration has aimed to purchase crude to refill the SPR at a price below the $95/bl average it received from the emergency sale last year of 180mn bl of crude. The price for the 6.3mn bl bought so far has averaged $72.67/bl, the Energy Department said.

The SPR could start its refilling process as early as this month, as oil companies start returning 30mn bl of crude borrowed from the SPR in "exchange" contracts. ExxonMobil was scheduled to return 3mn bl borrowed after Hurricane Ida in 2021 with delivery from 1 June to 31 August, according to a contract modification signed last year. Of the remaining crude exchanges, the SPR is scheduled to receive up to 20mn bl in 2024 and up to 7mn bl in 2025, contract data show.

By Chris Knight