Biden administration cancels 3 MMbbl Strategic Oil Reserve refill as oil breaks over $85

(Bloomberg) – The Biden administration won’t move forward with its latest plans to buy oil for the Strategic Petroleum Reserve amid rising prices.

The Energy Department said it was “keeping the taxpayer’s interest at the forefront” in its decision not to purchase as many as 3 MMbbl of oil for a Strategic Petroleum Reserve site in Louisiana. The plan for the barrels to be delivered in August and September had been announced in mid-March.

“We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow,” the department said. “We will continue to monitor market dynamics.”

The move follows a rally in crude prices, with U.S. benchmark West Texas Intermediate on Tuesday breaking above $85 a bbl for the first time since October. The Biden administration has a target to buy oil at $79 or lower to refill the reserve, though spent an average of about $81 a barrel in its latest purchase of 2.8 MMbbl late last month.

The Energy Department has been slowly refilling the emergency oil supply after it reached a 40-year-low following the administration’s unprecedented drawdown of a record 180 MMbbl in the wake of Russia’s invasion of Ukraine. It currently holds about 363 MMbbl according to Energy Department data, down from almost 600 MMbbl at the start of 2022.

“Domestic crude prices are likely to remain too high for the remainder of the year for DOE to resume its refilling program,” said Bob McNally, president of consultant Rapidan Energy Group and a former adviser to President George W. Bush. “If pump prices keep rising, the Biden administration will shift gears and reconsider SPR releases, though we current do not think they are imminent.”