The US Department of Energy has announced its plan to purchase up to 3 million barrels (mmbbl)of crude oil for the Strategic Petroleum Reserve (SPR) for delivery in March 2024.
This move comes as the department takes advantage of lower prices to start replenishing the stockpile.
The SPR, which was established in 1975, is a reserve of crude oil maintained by the US government. It currently holds 351.9 mmbbl of oil and is located in hollowed-out salt caverns on the Texas and Louisiana coasts.
This decision to purchase comes after the administration of President Joe Biden conducted the largest sale to date from the SPR last year, selling 180 mmbbl of oil to limit an oil price rally caused by Russia’s war on Ukraine in February 2022.
The Energy Department said in October it would buy back oil for reserves at $79 a barrel or less after receiving an average of about $95 a barrel from emergency sales last year. It plans to release monthly offers to buy crude for the emergency stash through May next year.
The new solicitation is for sour crude, which is a type of crude oil that contains a higher level of sulfur. The delivery will be received by the Big Hill SPR site in Texas.
The department has already bought back nearly 9 million barrels of oil for the reserve at an average price of $75 per barrel. It has also secured the return of nearly 4 million barrels by February, several months ahead of schedule, from a previous exchange with oil companies.
However, the return of oil is being tempered by planned life extension maintenance at the SPR. This means that the progress of replenishing the reserve may be slower than expected.