U.S. Department of Energy soliciting bids for crude oil to replenish petroleum reserve
(Bloomberg) – The U.S. is soliciting bids for up to 3 MMbbl of sour crude oil to refill its depleted Strategic Petroleum Reserve.
Deliveries into the emergency government stockpile are planned for August, with awards to be announced in June, the Energy Department said in its solicitation Monday. The move marks the agency’s second attempt to begin replenishing the Strategic Petroleum Reserve after it released more than 200 MMbbl last year, in part to curb high energy prices.
The announcement sent U.S. oil futures 0.5% higher to trade above $71 a barrel.
Oil traders have been closely watching for any indication that the government would begin refilling the reserve, as its purchases are bound to tighten the market. The sour crude grades sought by the Energy Department are already in high demand as OPEC+ cuts output. Any additional pull on domestic barrels could send oil prices higher, potentially raising gasoline prices in the middle of the summer driving season.
The Energy Department said in a statement that it plans to “repurchase crude at a lower price than the average of about $95 per bbl it was sold for in 2022, while strengthening energy security by providing certainty to the industry in a way that helps encourage near-term supply.” The department added that it plans to purchase more oil later this year.
The Biden administration last fall said the aim was to refill the reserve when prices were at or below about $67-$72 per bbl.
A prior attempt to refill the stockpile via another 3 million-barrel purchase, was canceled by the Energy Department in January, after the agency said offers it received were either too expensive or didn’t meet other specifications.
In addition to direct purchases, the agency has said part of its strategy for refilling the reserve includes a return of oil from previous exchanges and avoiding “unnecessary sales unrelated to supply disruptions.” The department successfully canceled some 140 MMbbl of oil sales mandated by Congress last year.
The reserve currently holds nearly 360 MMbbl of oil, about half of its total capacity, according to Energy Department data.