The US recently put itself into a bidding war over three million barrels of oil in order to restock our low Strategic Petroleum Reserve.
This past Monday, May 15th, the Energy Department announced the plan for the government’s oil stockpile restocking attempt. This would mark the second trial to refill the Reserve, after the department released nearly 200 million barrels of oil last year, in an attempt to curb the high cost of energy.
This recent announcement of their purchase sent US oil futures to be 0.5% higher to trade above the $71 current price point for a barrel.
Due to the effects the US’ purchases have on the market, oil traders have been watching and anticipating the next move with regard to the US government’s attempts to refill the reserve. The highly sought-after by the Energy Department sour crude grades are now in high demand as well, as OPEC+ cuts the output. If we see any further pull-on domestic oil barrels, we may face gas price increases in the middle of this upcoming summer.
In response to this worry, the Energy Department released a statement saying they have plans to “repurchase crude at a lower price than the average of about $95 per barrel 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.” Additionally, they are in talks to purchase even more oil later on this year.
Biden’s Administration announced in the fall of 2022 that their goal was to have refilled the reserve when we saw lower prices, ranging from $67-$72 per barrel.
In January, the Department came forward about a failed attempt to refill the reserve, also with a purchase of three million barrels. The plan died due to all offers being out of the budget or not meeting other specifications.
Currently, the Strategic Petroleum Reserve holds about 720 million barrels of oil, but only houses about half of that. The Biden Administration has been working hard to bring the amount held up due to criticism from Republicans that have accused the administration of pulling from the emergency supplies as a means to fight the raising gas prices.
